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Schools & Theories in Technical Analysis

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Published by Qusai Mustafa, 2025-02-27 11:23:04

Trading Schools & Theories

Schools & Theories in Technical Analysis

50 Flat Correction (A-B-C, 3-3-5 structure)) B A C B C A A B C A B C figure N bear market flat figure L bear market flat figure G bear market flat figure V bear market flat Figures [N] and [V] Another variation is the running flat, in which Wave B reaches the top of A, but Wave C fails to reach the bottom of A, suggesting strong market momentum in the primary trend direction. Figures [N] and [V] illustrate this formation in both bull and bear markets.


51 Triangles are five-wave corrective patterns that typically form in the fourth wave of an impulse or during a corrective phase efore the final move in the direction of the primary trend. They indicate market consolidation efore a reakout There are three main types of triangles Symmetrical Triangle Both support and resistance lines converge, creating a narrowing price range and signaling indecision efore a reakoutfi Ascending Triangle A flat upper resistance line with rising lows, often leading to a ullish reakoutfi Descending Triangle A flat lower support line with declining highs, often signaling a earish reakdownfi In an uptrend, triangles can e interpreted in two ways Bullish, as they suggest the continuation of the primary trendfi Bearish, ecause after the reakout, the trend may reach exhaustion shortly afterfi As illustrated in Figure [X], the market typically reaks out after the final contraction phase, leading to a decisive move efore a potential reversal. 8D Triangle (A-B-C-D-E, 9-9-9-9-9 structure)


52  Triangle (A-B-C-D-E, ---- structure) BULL MARflET BEAR MARflET Ascending (Top flat rising ) DESCENDING (Top declining, bottom flat ) CONTRACTING or symmetrical (Top declining, bottom rising ) EXPANDING or REVERSE SYMMETRICAL (Top rising bottom declining )


53 A. Identifying a T ade Setup B. Elliott Wave Tools C. T ading St ategy Example LI FinT an impuMse wave (1-2-3-Z-5?I >I Wait for the correction (A-4-C?I 3I Enter at Wave C or Wave 2 of a new impuMseI YI .se Fibonacci MeveMs to pMace stops anT targetsJ - Fibonacci Retracement & Extension TooMs (To finT entry/exit MeveMsS - TrenTMines & ChanneMing (Wave 2 & Z tenT to respect trenTMinesS - Momentum InTicators (RSI, MACD? (To confirm wave strength) - 4.Y after Wave C correction enTsI - SELL near Wave 5 peakI - STOP-LOSS beMow the start of the impuMse wave. F. Practical Application: Trading with Elliott Waves Traders use Elliott Wave Theory to predict price movements:


C. Gann theory


American stock and commodity trader, as well as a market theorist. He is best known for his work on price forecasting and technical analysis, incorporating mathematical and geometric principles into his trading strategies. “Time is the most important factor in determining market movements” William Delbert Gann (1878–1955) Gann Angles: A tool for analyzing price movement using angles (often called Gann Fan). Gann Square of Nine: A numerological method that predicts price and time reversals. Time Cycles He believed that time and price move in cycles and that markets repeat historical patterns. about Key Contributions: Gann theory 55


Gann Theory Key Principles of Gann Theory: ,/ Ma-ke0s Move in Cycles and Pa00e-ns Gann believed that markets follow repeating cycles and patterns, driven by natural laws and geometric principles. He observed that certain price movements occur repeatedly, allowing traders to predict future price changes by studying these patterns. Look for recurring market patterns in historical price data. Pay attention to specific intervals, like 90, 180, or 365 days, and mark these on your charts to identify when changes might occur. You can also track trends by observing how price moves in cycles of uptrends or downtrends. 56 A market forecasting method based on price, time, and geometry. It helps traders predict price movements by analyzing historical trends and natural cycles.


57 2. Price and Time Equilibrium In Gann Theory, the link between price and time is important. A stable market happens when price moves in sync with time. If price moves faster or slower, it may signal a correction or reversal. The 1×1 Gann angle shows this balance. Markets above it are bullish, while those below are bearish. These angles help find potential support and resistance levels. 3. The Law of Vibration Gann's Law of Vibration suggests that everything, including stocks and commodities, has a unique vibrational frequency linked to price movement. This frequency can be calculated using numbers to predict price direction. By looking at past price levels, time, trends, and price changes, traders can find the market's natural rhythm and use it to forecast future movements


58 4. Gann Angles Gann developed a set of geometric angles to understand market trends. Each angle represents a different rate of ascent or descent in the market. The most popular is the 1×1 angle, but others include the 2×1, 3×1, and so on. These angles help traders measure the strength of a trend. Apply Gann angles to your price charts. The 1×1 angle (a 45-degree angle) suggests that the market is moving in harmony with time and price. A break above the angle indicates that price is moving faster than time, which could signal an acceleration of the trend. A break below could mean a slowdown or reversal. An Example of Gann’s Analysis Tecnique can be seen in the figure on the right, depicting the use of Gann angles with Gann’s Theory to predict prices on eggs - Excerpt taken from “pattern, price, time” by James Hyercyzk


59  Time Cyles Gann focused on time cycles—regular periods when markets repeat patterns. By marking key highs and lows, and measuring the time between them, you can find cycles (like 30, 90, or 180 days). These cycles help predict when the market may change direction. 6. Geometrial Patterns and Ratios Gann used shapes like squares, triangles, and circles to predict price movements. He believed prices follow geometric patterns, especially angles. Tools like the Gann Square and Gann Fan help traders find support and resistance levels, making it easier to spot key price points. Cube Cuboid Sphere Pyramid Cone Cylinder


60 A. Gann Theory Key Tools Gann Theory comprises various mathematical tools designed for market analysis, each providing a unique perspective on price and time. These tools aim to predict market movements through geometric and numerical relationships. ;9 Gann:Square:of:Nine The Gann Square of Nine is a spiral of numbers that helps traders find price levels and potential market turns. Traders align the square<s center with a market price and use the angles to predict support and resistance levels. `9 Gann Fan The Gann Fan is a series of angles drawn from a price pivot point. These angles help traders identify potential support and resistance levels. Each line shows a relationship between time and pricea which is used to predict price movement.


61  Gnn Wheel The Gann Wheel of 24 is a circular tool that calculates time and price harmonics to forecast market cycles. It uses the number 24 as a base to connect different market aspects and identify key price points and potential market turning e ents. 2 Gann Grid The Gann Grid is an overlay on a chart that shows a 45-degree relationship between time and price. 3t helps track price movements against time intervals to identify trends and potential market direction changes. [ Gann Time \ycles Gann Time Cycles represent a method developed by William Delbert Gann, utilized to predict key turning points in the financial markets.


62 A) Forecasting Market Cycles Forecasting Market Cycles is a fundamental aspect of Gann Time Cycles. Gann’s theory posits that the market follows a series of repeatable cycles based on natural laws. These cycles are determined by specific time periods where markets are believed to experience trend changes. Traders often utilize Gann’s Wheel, also known as the Square of 9, a table that organizes numbers into a spiral, to calculate these periods. Key Time Cycle[ &ncludeZ % 60-Y!ar Mast!r Cycl % 20-Y!ar Cycl % 10-Y!ar Cycl % 5-Y!ar Cycle B) Anniversary Dates Gann emphasized the relevance of Anniversary Dates in analyzing market cycles. He suggested that markets could show repeated behavior on the anniversary of significant highs, lows, or other pivotal points from the past. Traders should observe these dates as potential indicators for market reversals. One core principle is to look at the historical charts to identify the dates that were turning points and monitor these dates in the current year. Significant Dates to MonitorZ % Previ‚u| Market High{ % Previ‚u| Market L‚w{ % Date| ‚f Hi|t‚rical Market Cra|hes Sample Market Cycle


63 C) Seasonal Cycles In Rann Time Cycles, Seasonal Cycles refer to the concept that certain times of the year consistently demonstrate specific market behaviors. This can be linked to the agricultural cycle, earnings seasons, fiscal policies, and other cyclical economic activities. These cycles can serve as an additional layer of analysis for traders to anticipate market movements. Examples of Seasonal Influences+ Q Harve!t Period! for Agricultural Commoditie Q Holiday Shopping Sea!on Impacting Retail Stock Q Fi!cal ,ear End for Tax-related Selling Here's how his techniques work: ann ba—ed prediction— of price movement— on three premi—e—+ Q Price, time a‘d ra‘ge are the o‘ly three factors to co‘siderŽ Q The markets are cyclical i‘ ‘atureŽ Q The markets are geometric i‘ desig‘ a‘d i‘ fu‘ctio‘. Ba—ed on the—e three premi—e—, ann'— —trategie— revolved around three general area— of prediction+ Thi— u—e— —upportoand re—i—tanceoline—, pivot point—oand angle—Ÿn oThi— look— at hi—torically reoccurring date—, derived by natural and —ocial mean—ž oThi— look— at market —wing— u—ing trendline— and rever—al pattern—Ÿ © Priceªstudy:  © Timeªstudy: © Patternªstudy:


64 B. Constructing Gann Angles Before we begin, it is important to realize that this form of analysis—like most forms of technical analysis—is not set in stone but constructed out of empirical methods. Without further ado, here is the process used to construct a Gann Angle: >; De?er<ine ?he ?i<e Uni?s:  This is one of the empirical processes. One common way to determine a time unit is to study the stock's chart and take note of distances in which price movements occur. Then, simply put the angles to the test and determine their accuracy. Most people use intermediate-term (such as one- to three-month) charts for this as opposed to long-term (multi-year) or short-term (one- to seven-day) charts. This is because, in most cases, the intermediate-term charts produce the optimal amount of patterns. w; Deterrine the high or low fror which to draw the Gann linesx This is the second empirical process, and the most common way to accomplish it is to use other forms of technical analysis —such as Fibonacci Levelsor pivot points. Gann himself, however, used what he called "vibrations" or "price swings." He determined these by analyzing charts using mathematical theories like Fibonacci. 5 Step Process to construct Gann Angles:


66 C. Application of Gann Theory in Trading A) Technical analysis B) Forecasting price movements C) Identifying key levels Gann theory emphasizes technical analysis by studying past price movements to predict future trends. Traders use tools like Gann angles, Gann fans, and Gann squares to identify key support and resistance levels in the market. Gann theory also focuses on forecasting price movements using mathematical calculations and geometric patterns. This helps traders predict market direction changes or trend continuations, enabling more accurate predictions and better trading decisions. Gann theory highlights the importance of identifying key market levels, like support and resistance, which act as barriers to price movement. Recognizing these levels helps traders manage risk, optimize trade entries and exits, and improve the likelihood of profitable trades.


D. wyckoff method


over bought over sold Accumulation Area Distribution Area supply greater
 than demand demand greater
 than supply Mark down Mark up American stock market authority and a pioneer in technical analysis. He is best known for creating the Wyckoff Method, which focuses on understanding the actions of professional market operators to predict market movements. ““The stock market is never wrong; the opinion of the public is wrong”” Richard Wyckoff (1878–1955) Wyckoff Method: A framework to analyze market trends and identify accumulation or distribution phases. The Law of Supply and Demand: A numerological method that predicts price and time reversals. Price & Volume Analysis: Focused on the relationship between price movements and volume to predict future trends. about Key Contributions: Wyckoff Method 68


Wyckoff Method ff Law of Suly and Demand The Three Wyckofi Laws Two main forces that determine prices and quantities in a market. They help explain why goods become expensive or cheap and how businesses decide how much to produce. _ De`and The quantity of a product that consumers want to buy. Demand increases (people buy more) When prices goes down When prices goes up Demand decreases (people buy less) _ Supply Theœquantityœofœaœgoodœorœserviceœthatœproducersœareœwillingœandœableœ toœofferœatœdifferentœprices. When prices goes up Supply increases (businesses produce more). When prices goes down Supply decreases (businesses produce less) A trading approach that analyzes market movements based on supply and demand, price action, and investor psychology. The Wyckoff Method remains widely used today, especially in stock and crypto trading, helping traders understand market structure and make informed decisions. 69


 La of Cause and Effect States that a period o accumulation (cause) leads to an uptrend (eect), while a period o distribution (cause) leads to a downtrend (eect). P AccumuLation → UptrenQ (Big players quietly buy before prices riseK P Distribution → DowntrenQ (Big players sell before prices fall) g Law of Effoct Vecsus Result Compares volume (effort) to price movement (result) to judge market strength. 70


71 Core Concept: Wyckoff's Observations Price Cycle Phases: The market can be analyzed and anticipated by studying supply and demand using price action, volume, and time. Large market participants (e.g., institutions) prepare and execute bull and bear markets. Their activities can be decoded using vertical (bar) charts and Point-and-Figure (P&F) charts. Large players build positions, preparing for a bull market (price markup). Prices rise as demand outweighs supply. Large players sell off positions, preparing for a bear market (price markdown). Prices fall as supply outweighs demand. A) Accumulation: B) Markup: C) Distribution: D) Markdown: Wyckoff believed market moves could be predicted by studying supply and demand through price, volume, and time. As a broker, he analyzed big players' actions using bar and Point-and-Figure charts. He identified key moments for trading: Buy near the end of accumulation before prices rise. Sell (short) near the end of distribution before prices fall. A. Wyckoff Price Cycle:


72 The Wyckoff Method focuses on market timing by studying trading ranges (TRs), where supply and demand balance, stopping the trend" In these ranges, big players (Composite Man) accumulate before price rises or distribute before price falls! 6 Accumulation TRs: Buying exceeds selling, preparing for a bullish move! 6 7istribution TRs: Selling exceeds buying, leading to a bearish trend. The size of accumulation or distribution affects how big the next price move will be" Wyckoff’s schematics and guidelines help traders spot key phases in trading ranges, predicting direction and price targets. Analyses of Trading Ranges and Wyckoff Schematics Wyckoff Accumulation Phase: Key phases in a market's preparation for a price markup"§ 6 PS (Preliminary Support): First signs of demand slowing the decline! 6 SC (Selling Climax): Strong selling pressure exhausts supply, causing a sharp drop! 6 AR (Automatic Rally): Price rebounds as selling pressure fades! 6 ST (Secondary Test): Retests SC levels to confirm support! 6 Spring (Optional): A final shakeout to trap sellers before the uptrend! 6 Sign of Strength (SOS): Increased volume and price movement confirm demand"


73 2 L3S (Last 3oint of Support): A pullbck to support fter  SOS, indicting strong demnd 2 BU (Back-Up): A pullbck or test t resistnce before  mjor price dvnce. Phase A PS SC AR ST ST in Phase B Spring Test LPS SOS BU/LPS Resistance Lines Support Lines Phase B Phase C Phase D Phase E Phase A PS SC AR ST ST in Phase B LPS SOS BU/LPS Resistance Lines Support Lines Phase B Phase C Phase D Phase E Sample #1 Wyckoff Accumulation Phase: Sample #2 Wyckoff Accumulation Phase (without Spring):


74 Wyckoff Distribution Phase Distribution Example Visual: Key pha…e… in a market'… preparation for a price markup.= „ Preliminary Supply (PSY): First signs of selling pressure slowing the uptrendO „ Buying Climax (BC): Sharp priPe rise with heavy volume as big players sellO „ Automatic Reaction (AR): PriPe drops as buying pressure weakensO „ Secondary Test (ST): Retests BC levels to Ponfirm resistanPeO „ Upthrust (UT) / UTAD (Optional): > false breakout to trap buyers before the dropO „ Sign of Weakness (SOW): InPreased selling volume, priPe struggles to riseO „ Last Point of Supply (LPSY): Final retest before the breakdownO „ Breakout & Markdown: PriPe falls out of the range, starting a downtrend. Phase A PSY AR BC ST UT UTAD Test LPSY LPSY SOW in Phase B SOW Phase B Phase C Phase D Phase E


B. The Composite Man fl ffiarket Influence – The Composite Man has the power to drive market movements through strategic buying and selling, often in large quantities, to influence prices. H ManipGlation – He can make the market appear more active or volatile than it actually is to attract retail investors, whom he ultimately profits from. j Stratigy – He carefully plans his moves, accumulating stocks when prices are low (during the accumulation phasek and selling them when prices are high (during the distribution phasek. ” Retail Traders – Wyckoff believed that retail traders should learn to think like the Composite Man to understand the market better and anticipate his moves. The Composite Man is a concept introduced by Wyckoff to represent the large institutional players or operators who control and manipulate stock prices. This figure is not a single person but a representation of the collective actions of big market participants (such as large institutions, banks, and wealthy investors). 75


76 C. Supply & Demand Analysis in the Wyckoff Method The CnClysis of supply Cnd demCnd, C cornerstone of the Wyckoff Method, re-ol-es Cround interpreting price Cnd -olume mo-ements on bCr chCrts. , A wide price spreCd closing high on Cbo-e-C-erCge -olume signCls strong demCndB , Con-ersely, C wide price spreCd closing low on high -olume indicCtes significCnt supplyB , Supply Cnd DemCnd (1st LCw): Price rises when demCnd exceeds supply Cnd fClls when supply surpCsses demCnd, Cchie-ing temporCry equilibrium Ct new le-elsB , Effort -s. Result (3rd LCw): ExCmines price--olume relCtionships to detect trend chCnges. HCrmony between high -olume (effort) Cnd significCnt price mo-ement (result) suggests trend continuCtion. Di-ergences, such Cs high -olume with minimCl price chCnge, indicCte CccumulCtion (bullish) or distribution (beCrish)B , AccumulCtion: High -olume with limited price mo-ement neCr support reflects lCrge buyers Cbsorbing supply, signCling potentiCl bullishnessB , Distribution: High -olume with limited upwCrd price mo-ement shows supply outweighing demCnd, indicCting potentiCl beCrishness. Key insights incluUeT oz Wide-Sppead Baps and Volumed cz Wyc{off`s Lawsd _z Examples in Tpading eangesd


77 Example Scenario: In an observed chart of AAPL, three price reactions exemplify Wyckoff's third law: Prices fall on wide spreads with increasing volume. The harmony between effort and result confirms supply dominance. Prices decline similarly but with smaller spreads and lower volume. This divergence indicates diminishing supply, pointing to potential upward movement. The swing size shrinks while volume rises. Effort exceeds result, signaling that large buyers are absorbing supply in preparation for a rally. This analysis helps traders predict market turning points, assess risk, and improve timing. By using supply and demand insights with Wyckoff's laws, traders can better understand market dynamics. Reaction #1: Reaction #2: Reaction #3:


78 D. Comparative Strength Analysis in the Wyckoff Method Wyckoff's comparative strength analysis identifies stocks outperforming or underperforming the market% guiding long and short position selections for optimal trading opportunities) $ Identify stocks that are stronger than the market during trends and trading ranges( $ Look for higher highs and higher lows in the stock's price relative to the market( $ Spot stocks that are weaker than the market during trends and trading ranges( $ Observe lower highs and lower lows in the stock’s price relative to the market( $ Wyckoff placed bar or Point-and-Figure charts of stocks directly under market charts for visual comparison( $ He analyzed waves or swings% noting the strength or weakness of each wave compared to prior movements and the corresponding waves in the market chart( $ Significant highs and lows on both charts were compared to determine relative strength. Principles of Comparative StrenMth AnalysiL zw xut{erformnnce for Long Poqgtgonp fw Under{erformnnce for ahort Poqgtgonp `w Mnnunl Chnrt Com{nrgqom ew Key Hgghq nnd Lowp


79 Example: AAPL vs. NASDAQ 6omposite Index ($6OMP&% 5 AAPL underperformed the NASDAQ at point #3 (lower high vs higher high) By February, AAPL outperformed with a higher high and higher low at points #5 and #6, while the NASDAQ showed a lower high and low 5 Wyckoff would favor long positions in stocks showing relative strength, provided other criteria were met (eg, his Nine Buying/Selling Tests)


80 Key Takeaways for Traer 9 Comparative stren#th analysis is invaluable for identifyin# stron# stocks in uptrends or weak stocks in downtrends" 9 Combinin# this analysis with other elements of the Wyckoff Method— such as the Nine Buyin#/Sellin# Tests and Point-and-Fi#ure projections —provides a robust framework for stock selection" 9 Modern tools like the RSR add precision and ease to Wyckoff’s timetested principles, makin# them even more effective in contemporary markets. Modern Tools for Co:parative Strength Analysis Today’s Wyckoff practitioners have advanced tools like the nelative Stren`th natio (nSn) to perform comparative stren`th analysis more accurately and efficiently" 9 Eliminates inaccuracies caused by differin` price scales between a stock and its index" 9 Quantifies the relative performance, providin` clear numerical insi`hts" 9 Plot the nSn between the stock and a market proxy (e.`., S&P 500, NASDAQ)" 9 Identify periods of increasin` nSn for lon` candidates and decreasin` nSn for short candidates. ˜” Advan•ages of •he Reƒa•ive S•reng•h Ra•io‚ ” Appƒica•ion‚


81 E. Wyckoff's Nine Buying and Selling Tests The nine buyinD ?nd e$$inD te t offer ? det?i$ed fr?mework to Duide tr?der in determininD when to enter or exit po ition , iDn?$inD when ? tr?dinD r?nDe i $ike$y tr?n itioninD into ? m?rkup (uptrend) or m?rkdown (downtrend). The e te t $ever?De both b?r ?nd Point-?nd-FiDure (P&F) ch?rt to ev?$u?te upp$y ?nd dem?nd dyn?mic , price tructure, ?nd profit potenti?$. The e te t focu on identifyinD condition f?vor?b$e for ? new uptrend ?fter ?n ?ccumu$?tion ph? e# fi Ch?rt" P&F ch?rC fi Indic?te the downtrend h? met it projected t?rDet> fi Ch?rt" B?r ?nd P&F ch?rt! fi SiDn?$ the end of ?DDre ive e$$inD ?nd the e t?b$i hment of ? tr?dinD r?nDe> fi Ch?rt" B?r ch?rC fi Vo$ume incre? e durinD r?$$ie ?nd decre? e durinD re?ction , howinD dem?nd domin?nce> fi Ch?rt" B?r or P&F ch?rC fi Supp$y or downtrend $ine i penetr?ted, indic?tinD ? hift in trend> fi Ch?rt" B?r or P&F ch?rC fi Succe ive re?ction produce proDre ive$y hiDher $ow , howinD reduced upp$y. Nine Buying Tests for Accumulation —” Dow‰siƒ• pric• ob}•ctiv• accomplisv•‚ n” Pr•limi‰ary support (PSg, s•lli‰g climax (SCg, s•co‰ƒary t•st (Scf b” Activity bulliŒu a” Dow‰warƒ striƒ• broo•ˆ |” Higv•r low‹


82 ! Higher high ! Soc ronger hn he mre ! Be "orming horizon price ine ! Upide profi poeni i  e hree ime he ri 0 Char=: Bar or P&F char< 0 1allie. achieve pro:re..ively hi:her hi:h., .i:nalin: increa.in: demand9 0 Char=: Bar char< 0 S=ock ou=perform. =he marke= durin: rallie. and re.i.=. decline.9 0 Char=: Bar or P&F char< 0 Price con.olida=e. in=o a =radin: ran:e, preparin: for markup9 0 Char=: P&F and bar char=- 0 En.ure. a favorable reward-=o-ri.k ra=io for en=erin: a lon: po.i=ion.


83 Nine Selling Tests for Distribution The1e te1t1 determine the condition1 condcive to a new downtrend followin! a di1triffltion pha1effi  Chart: P&F char  Indicate1 the ptrend ha1 met it1 projected tar!etfi  Chart: Bar and P&F chart0  Volme decrea1e1 drin! rallie1 and increa1e1 drin! reaction1, 1i!nalin! 1pply dominancefi  Chart: Bar and P&F chart0  Indicate1 the concl1ion of a!!re11ive fflyin! and the e1tafflli1hment of a tradin! ran!e. ]a UpsiSe objeGtive aGGomplisheR Da AGtivity bea^isF Aa B^elimina^y supply EBSY=, buying Glimax EBC<


84 )" S ocffl weffler hn he rffle fi" #wrd  ride broffle ffi" Lower high " Lower low " Crown or ing l erl ove en  " Downide #rofi #o en il i  le hree i e he rifl P CharI: Bar charH P SIock underperform3 during raFFie3 and reacI3 more 3harpFy Io decFine3E P CharI: Bar or P&F charH P SupporI or upIrend Fine i3 peneIraIed, 3ignaFing Irend rever3aFE P CharI: Bar or P&F charH P Succe33ive raFFie3 produce Fower high3, indicaIing weakening demandE P CharI: Bar or P&F charH P DecFine3 achieve progre33iveFy Fower Fow3, confirming increa3ing 3uppFyE P CharI: P&F charH P Price con3oFidaIe3 inIo a Irading range, preparing for markdownE P CharI: P&F and bar charI2 P En3ure3 a favorabFe reward*Io*ri3k raIio for enIering a 3horI po3iIion.


85 F. Wyckoff Point-and-Figure (P&F) Count Guide Wyckoff'3 P&F cou8t method i3 @ 3y3tem@tic @ppro@ch to project price t@rget3 for lo8g or 3hort tr@de3. Rooted i8 the L@w of C@u3e @8d Effect, thi3 method li8k3 the horizo8t@l cou8t withi8 @ tr@di8g r@8ge (the C@u3e) to the 3ub3eque8t price moveme8t (the Effect). Below @re the 3tep3 to c@lcul@te P&F price t@rget3: 7 U3e both b@r @8d P&F ch@rt3 coveri8g the 3@me tr@di8g r@8ge (TR) @8d timefr@me? 7 Choo3e @8 @ppropri@te box 3ize b@3ed o8 the price level2 7 Low-priced 3tock3 (< $50): Box 3ize of 0.5 or 1 poi8t? 7 High-priced 3tock3 (> $200): Box 3ize of 5 poi8t3? 7 I8dice3 (e.g., DJIA): Box 3ize of 100 poi8t3? 7 O8 the b@r ch@rt, loc@te the LPS, the l@3t poi8t where 3upport w@3 met o8 @ re@ctio8? 7 Look for @ Sig8 of Stre8gth (SOS) 8e@r the right 3ide of the TR, ofte8 followed by the LPS? 7 Tr@83fer the LPS to the P&F ch@rt? 7 St@rt @t the LPS @8d cou8t horizo8t@lly from right to left @lo8g the price level of the LPS? 7 T@ke @ co83erv@tive cou8t fir3t, progre33i8g leftw@rd through ph@3e3 of the TR. Steps to Determine P&F Price Tarhetg ˆ S–‘–c“ App‰op‰ia“– Cha‰“s and Box Siz• y Id–n“ify “h– Las“ woin“ of Suppo‰“ (LwSv t Coun“ Co‘umns on “h– wuF Cha‰’


65  Draw the patterns:  The direction would be either downward and to the right from a high point or upward and to the right from a low point. 8 Look :or repeat patterns :urther down the chart:  Remember this technique is based on the premise that markets are cyclical. Mastering Gann Angles takes practice and adjustments, leading to different results. Some traders refine their skills and succeed, while others see average returns. With consistent effort, better results are possible. Since trading is based on probabilities, using Gann Angles with other indicators improves success rates. ƒ Deter€ine which pattern to use: The two most common patterns are the 1x1 , the 1x2 and the 2x1. These are simply variations in the slope of the line. For example, the 1x2 is half the slope of the 1x1. The num„ers simply refer to the num„er of units.


86 ( Defiig PffF Phae ffl Validaig oger-Term ou  Seppig-Soe ou  Price Targe alculaio  Obervig Price ff Volume a Targe K Divide the TrJdiLg RJLge (TR) iLto phJses bJsed oL Wyckoff eveLts (PS, SC, ST, LPS, SOS)I K Add oLe complete phJse Jt J time, JvoidiLg pJrtiJl phJsesI K ExJmple4 K PhJse 1: From LPS to SpriLgI K PhJse 2: From SpriLg to STI K LoLger-term tJrgets JligL with PrelimiLJry Support (PS) or SelliLg ClimJx (SC) levelsI K A SpriLg cJL Jct Js the LPS if followed by J SigL of StreLgth (SOS)I K SmJll coLsolidJtioLs withiL J treLd coLfirm the origiLJl P&F couLtI K Use J smJller box size for meJsuriLg re-JccumulJtioL phJsesI K As steppiLg-stoLe couLts JpproJch the tJrget, wJtch for treLd coLtiLuJtioLI K Multiply the Lumber of columLs by the box size JLd reversJl metricI K Add the result to:
 A) CouLt liLe 5 for mJximum tJrget.
 )) TR low 5 for miLimum tJrget.
 C) MidpoiLt of TR low & couLt liLe 5 for JL iLtermediJte tJrgetI K Use bJr chJrts to moLitor price JLd volume Js the price reJches projected tJrgetsI K TJrgets Jre Lot exJct reversJl poiLts but JreJs where price JctioL should be JLJlyzed.


87 Example Analysis on The Dow Jones Industrial Average DJIA Q Box Bize: 100 poiRMA Q ReverB9l meMric: 3-box reverB9L Q ProceBB@ Q CouRM Mhe Rumber of columRB 9M Mhe couRM liRe (e.g., 15 columRB)8 Q MulMiply: 15×100×3=450015 \MimeB 100 \MimeB 3 = 450015×100×3=45008 Q Add MhiB Mo@ Q CouRM liRe: RepreBeRMB Mhe m9ximum price objecMive8 Q Low of Mhe TR: RepreBeRMB Mhe miRimum price objecMive8 Q MidpoiRM: ProvideB 9 more coRBerv9Mive M9rgeM. ReBulM: TheBe M9rgeMB iRdic9Me likely 9re9B for BMoppiRg 9Rd coRBolid9MioR.


88 G. The Wyckoff Method: A Five-Step Approach to the Market 4B Assess 9a5ket T5end+ )B Select T5end-Aligned Stocks* 8B Identify Stocks with Sufficient "Cause"* (B Confi5fl Readiness to 9ove* B Tifle Ent5ies with 9a5ket Tu5ns* Analyze market structure, supply, and demand usind bar and P&F charts to determine if the market is consolidatind or trendind and decide on lond or short positionsc M In an uptrend, pick stocks stronder than the market (larder rallies, smaller reactions)c M In a doNntrend, choose Neaker stocksc M Use Wyckoff’s "Cause and Effect" principle Nith P&F projections to find stocks under accumulation/re-accumulation that meet your price objectivec M Apply Wyckoff’s nine buyind/sellind tests to assess Nhether stocks are ready for a move based on evidence of supply absorption or sidnificant supply presencec M Alidn trades Nith potential market turns usind Wyckoff principles, such as a chande in price action or volumec M Cet and trail stop-losses to manade risk. The Wyckoff Method: Five-Step Approach involves analyzing market trends, selecting trend-aligned stocks, using the "Cause and Effect" principle to find stocks with potential, confirming readiness with Wyckoff’s tests, and timing entries with market turns while managing risk with stoplosses. The 5 Step Approach:


Part - 3 Harmonic


1. harmonic School


38.2% - 88.6% 113% - 161.8% 78.6% 61.8% Gartley pattern X A B C D A financial analyst, is best known for creating the Gartley Pattern, a key idea in harmonic trading. Introduced in his 1935 book, Profits in the Stock Market, it uses price patterns and Fibonacci levels to find strong trading opportunities. “Successful trading is not about guessing—it’s about recognizing probabilities.” (1899-1972) Gartley pattern: A five-point harmonic pattern based on Fibonacci retracements. Integration of Fibonacci Gartley was among the first to combine Fibonacci retracements with geometric price structures. about Key Contributions: Harmonic School Harold McKinley Gartley Profits in the Stock Market (1935): His book introduced advanced technical analysis concepts foundation for modern harmonic trading. 91


92 A. Fibonacci The sequence is named after Leonardo Fibonacci, an Italian mathematician who introduced it to the Western world in the 13th century. Architecture The Fibonacci sequence is a series of numbers where each number is the sum of the two preceding ones. 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, … It appears when you divide a number in the sequence by the one before it. This ratio is found in nature, art, architecture, and financial markets. One of the key properties of Fibonacci numbers is the golden ratio (φ ≈ 1.618) Nature Art In the next chapter, we will dive into how Fibonacci is applied in trading and how you can use it to improve your market analysis. As the core foundation of Harmonic patterns, utilizing precise retracement and extension levels to define structure, identify high-probability reversal zones, and predict market turning points with accuracy.


93 ! 78.6% – Deep retraceme*t before co*ti*uatio) ! 61.8% – Stro*g support/resista*ce (Go#e* atio ! 50.0% – Not a Fibo*acci *umber but commo*#y use ! 38.2% – Sha##ow retraceme*" ! 23.6% – Mi*or pu##back QF Ie*tify a stro*g uptre* or ow*tre*F 9F Draw the Fibo*acci retraceme*t from the swi*g #ow to swi*g high (uptre*) or swi*g high to swi*g #ow (ow*tre*)F KF Watch for price actio* arou* the retraceme*t #eve#s for pote*tia# e*try poi*ts. Fibonacci in TradinR Traers use Fibo*acci retraceme*t a* exte*sio* #eve#s to ie*tify pote*tia# support a* resista*ce #eve#s, tre* reversa#s, a* price targets. How to Use Fibonacci Retracement: 1. Fibonacci Retracement Use to ie*tify pu##back #eve#s withi* a tre*.


94  ibonacci Extension Used to project potential price targets beyond the previous high or lo. How to Use Fibonacci Extension: XO Identify a trend and its retracementO BO Dra the Fibonacci extension using the same sing pointsO SO Use the levels as potential profit targets. q 161e8% – Strong target (Golden Ratio_ q 261e8% – `ggressive targed q 361e8% – Extreme target q Use with Other Indicators – Combine with OBV, moving ŒverŒges, RSI, MACDO q Look for Confluence – If Œ FibonŒcci level Œligns with Œ support/ resistŒnce level, it’s strongerO q Check Volume – High volume neŒr extension levels Œdds confirmŒtionO q Consider Market Conditions – Trending mŒrkets fŒvor extensions more thŒn rŒnging mŒrkets. Best Practices for Using Fibonacci Extension


95  ionacci ans & Arcs Fibonacci Fans and Arcs are alternative ways to visualize support and resistance levels beyond the traditional Fibonacci retracements A. Fibonacci Fans A Fibonacci Fan consists of diagonal trendlines drawn from a significant swing high or low. These lines act as dynamic support/resistance levels as price moves forward in time. B. Fibonacci Arcs Fibonacci Arcs create curved support/resistance zones based on Fibonacci ratios. They help identify potential price reversals and dynamic price zones.


96  Fi onacci Time Zones Fibonacci Time Zones are a technical analysis tool used to predict potential points in time when significant price moements or trend reersals may occur. How to Use Fibonacci Extension: aV Identify a Significant Swing (Trend MoeD CV Apply the Fibonacci Time Zones TooT ZV Watch for Price Reactions at Fibonacci Time Zones


97 The Harmonic School of trading uses Fibonacci ratios and price patterns to predict market reversals. It focuses on precise geometric patterns that repeat over time. How it Works ? @ses retracements & extensions to identify trend reversals5 ? Relies on like Gartley, Bat, Butterfly, Crab, and Shark5 ? Requires must align perfectly with Fibonacci levels5 – Forex, stocks, crypto, and commodities. Fdbonaccd structured patterns accuracy – Patterns c Appldes to All Markets Helps spot trend reversals early.
 Provides clear entry & exit points.
 Works across different timeframes. Key Principles Why Traders Use It


Structure BC - Leg 3 CD - Leg 4 XA - Leg 1 AB - Leg 2 X B C D B C D A A X Most Common Harmonic Patterns A> Gartl?y J> Butt?rfly O> Bat U> CraP \> SharV 9]


The Gartley pattern is formed by 4 swings of the price. The bullish Gartley pattern looks similar to a letter M, while the bearish one resembles a W. The letters to mark a Gartley pattern on the chart are XABCD. The XA line should be the longest line of the pattern B. Gartley Pattern X A B C D 38.2% - 88.6% 113% - 161.8% 78.6% 61.8% Bullish Gartley 38.2% - 88.6% 113% - 161.8% 78.6% 61.8% Bearish Gartley X A B C D XA wave The initial price movement in either an uptrend or downtrend. AB wave: Retraces 61.8% of the XA wave. BC wave: Retraces 38.2% - 88.6% of the AB wave. CD wave ° Extends 78.6% of the XA wave (the key Fibonacci extension)§ ° The D point marks the potential reversal zone (PRZ). 99


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