Introduction: Five Elements of Successful Trading [ Members Only ]
The goal of this tutorial is to help you answer the questions of where to enter a trade, exit a loss, and exit a profit through the application of price patterns. Important Note: Before working through the tutorial, please take a moment to read through the Introduction, where you will find the Five Elements of Successful Trading: Time Horizon, Broader Market, Manage Risk, Diversify and Position Size.
Section 01: Understanding Supply and Demand Dynamics
The supply of and demand for stock are constantly changing. Buy and sell orders rapidly determine the price of a stock over seconds and hours. But the levels of supply and demand can be aggregated into trends. These trends take shape over days and months. The trends can be defined in a consistent and objective way.
Section 02: Objectively Identifying Trends [ Members Only ]
Trend identification is a vital step in trading price patterns. The patterns revolve around trends, either predicting the continuation of trends or the reversal of trends. With the problem of trend identification solved by using one of the three methods in this section, the next step is laying the foundation of price patterns.
Section 03: Support and Resistance [ Members Only ]
Whether identifying horizontal support, diagonal support, or a bullish channel, the concept is the same: The stock stops going down near a particular price level. The same holds true for the various forms of resistance. The only difference is that the stock stops moving higher.
Section 04: Introduction to Price Patterns [ Members Only ]
Price patterns project the future path of stocks. The patterns do so by observing the past price action of a stock and projecting the collective intentions of buyers and sellers into the future.
Section 05: Bullish Continuation Patterns [ Members Only ]
Bullish price patterns are the most important to learn. The reason is simple: Stocks tend to move higher most of the time. Not all of the time. Not every time. But stocks tend to move higher a good portion of the time. Furthermore, stocks can go exponentially higher, but they can only fall to zero.
Section 06: Bearish Continuation Patterns [ Members Only ]
Bearish continuation patterns are best to apply in bearish markets, industries, or individual stocks. It sounds simple enough, but too many traders ignore this axiom. Don’t go looking for bearish continuation patterns in bullish markets or sectors.
Section 07: Bullish Reversal Patterns [ Members Only ]
Bullish reversal patterns predict the end of an existing bearish trend and the beginning of a bullish trend. The patterns can be applied over very short periods of time, especially in the case of 123 bottoms. Other bullish reversal patterns can take months or even years to play out.
Section 08: Bearish Reversal Patterns [ Members Only ]
Bearish reversal patterns predict the end of an existing bullish trend and the beginning of a bearish trend. The patterns can be applied over very short periods of time, especially in the case of 123 tops. Other bearish reversal patterns can take months or even years to play out.
Section 09: Setting Price and Time Targets [ Members Only ]
Price patterns can be used to forecast price targets and the time in which a stock might be expected to hit its target. Most of the price patterns generate two different price targets: long-term and short-term. A few of the patterns, such as double and triple bottoms, only generate one price target.
Section 10: The Market Situation [ Members Only ]
The Market Situation is an advanced view of the market. Identifying the trend of the broader market could be as simple as using one of the trend identification methods. The Market Situation, however, takes a multi-faceted view. Identifying the current situation of the market, and aligning your trading with it, is a good way to increase the probabilities of success when trading price patterns.
Section 11: Trading Price Patterns with Technical Indicators [ Members Only ]
Technical indicators can be traded with price patterns to form a powerful combination. The application of indicators enables traders to anticipate confirmation. Anticipating the break of a price pattern secures a better entry point in terms of higher profit potential and lower risk. Forecasting a break is a difficult process, but one that can be made easier with the use of technical indicators.
Section 12: Trading Price Patterns [ Members Only ]
Successfully trading price patterns requires identifying entry points, determining exit points from losing trades, identifying exit points from winning trades. The subtleties of these three components may vary a little bit with changing market conditions, but the strategies for determining each point don’t change.