The following are explanations of the terms and abbreviations used on this blog.
The ideas I present here may not always be in agreement with conventional wisdom.
For the most part they are based on my personal observations of the way markets function.
The ideas I present here may not always be in agreement with conventional wisdom.
For the most part they are based on my personal observations of the way markets function.
MMO - Major Market Open...also used for the major's 9:30 AM open thru 4:00 PM close
* HH, HL, LH, LL - Higher High, Higher Low, Lower High, Lower Low
* P/A or Price Action - description of price movements, i.e. a series of HH's & HL's describes an up trend
TLB - Trend Line Break, price moving above a down trend line (or below an up trend line).
TLB-ReTest - price returning to the level at which it broke a trend line
DIVERGENCE - Price going in one direction while an indicator or indicators do the opposite
I identify three main types of divergences based on where in the price trend they occur
These occur at bottoms:
DIV or regular divergence...Price makes a LL as an indicator makes a HL
2xD - two indicator divergence
3xD - three indicator divergence
Compare 2xD with 3xD
These occur in up trends:
RD or REV DIV - Reverse or hidden divergence...Price makes a HL while indicators make a LL
These occur at trend tops: Reversing Divergence ...Price makes a HH while indicators make a LH...
* MOF - Money on the floor, a pull back that reverses before reaching a previous low...(often it's the first HL that marks the reversal of a down trend)
* Slingshot - describes a reversal pattern in the stochastic indicator that begins below the study center or in the over-sold area...
(when completed, it will have mirror-image down and up legs)
* SLING - a continuation slingshot ... a pattern that suggests the continuation of a newly established upward trend .
STO HOOK - Describes the stochastic indicator when it is in the process of changing direction from down to up.
MACD X or MAC X - crossing of the MACD EMA 'fast' and Signal lines...
also used for the point where either of the MACD EMAs begin to hook or move higher
MAC Trend or MT- refering to the short term or long term direction of the MACD EMAs
MAC EMA HOOK - the point where the "fast" MACD EMA changes direction (from down to up)
MT SLING - a combination pattern...flat or rising MACD EMAs and 'hooking' Stochastic that print at the same time
NEG MT HOOK - An inverted MT SLING...flat or dropping MACD EMAs and 'hooking' Stochastic
1-2 PUNCH - Another combination pattern using the Stochastic and MACD EMAs
* BZ or Brach Zone - a method using the 61.8% and 78.6% Fibonacci levels to describe potential target and reversal areas
* 2B Dragon or 2B - a specific double bottom pattern characterized by features of the mythical creature...
Starting at the upper left hand side of a chart:
A 'Top-of-Tail' followed by 'rear feet and front feet' with a 'hump' in between
followed by a consolidation area that defines the Dragon's 'head'
* The BLINE - A trend change indicator using a 6-period EMA of a 5-period TRIX...it incorporates a formula (input>input[1])
that prints signals on the EMA when the TRIX is sloping in an upward direction. This can be used as a stand-alone indicator
but reacts to P/A very quickly, especially on short term charts. Its best to use it in conjunction with other indicators to confirm...
Other Double Bottom patterns:
BAT WING - a consolidation pattern which forms in up trends that looks similar to double bottom reversal patterns which form in down trends.
These can be bullish, suggesting current trend continuations but at other times are bearish and marking a top.
They are a fun pattern that describes Price Action after the fact...they are not stand-alone signals for entry because of their unpredictability.
PRANCING Pony - Another fun name for a particular reversal pattern that forms within a diamond.
I was inspired to name it after a Joni Mitchell tune...A more in depth description is available here.
These occur at trend tops: Reversing Divergence ...Price makes a HH while indicators make a LH...
* MOF - Money on the floor, a pull back that reverses before reaching a previous low...(often it's the first HL that marks the reversal of a down trend)
* Slingshot - describes a reversal pattern in the stochastic indicator that begins below the study center or in the over-sold area...
(when completed, it will have mirror-image down and up legs)
* SLING - a continuation slingshot ... a pattern that suggests the continuation of a newly established upward trend .
STO HOOK - Describes the stochastic indicator when it is in the process of changing direction from down to up.
MACD X or MAC X - crossing of the MACD EMA 'fast' and Signal lines...
also used for the point where either of the MACD EMAs begin to hook or move higher
MAC Trend or MT- refering to the short term or long term direction of the MACD EMAs
MAC EMA HOOK - the point where the "fast" MACD EMA changes direction (from down to up)
MT SLING - a combination pattern...flat or rising MACD EMAs and 'hooking' Stochastic that print at the same time
NEG MT HOOK - An inverted MT SLING...flat or dropping MACD EMAs and 'hooking' Stochastic
1-2 PUNCH - Another combination pattern using the Stochastic and MACD EMAs
* BZ or Brach Zone - a method using the 61.8% and 78.6% Fibonacci levels to describe potential target and reversal areas
* 2B Dragon or 2B - a specific double bottom pattern characterized by features of the mythical creature...
Starting at the upper left hand side of a chart:
A 'Top-of-Tail' followed by 'rear feet and front feet' with a 'hump' in between
followed by a consolidation area that defines the Dragon's 'head'
* The BLINE - A trend change indicator using a 6-period EMA of a 5-period TRIX...it incorporates a formula (input>input[1])
that prints signals on the EMA when the TRIX is sloping in an upward direction. This can be used as a stand-alone indicator
but reacts to P/A very quickly, especially on short term charts. Its best to use it in conjunction with other indicators to confirm...
Other Double Bottom patterns:
BAT WING - a consolidation pattern which forms in up trends that looks similar to double bottom reversal patterns which form in down trends.
These can be bullish, suggesting current trend continuations but at other times are bearish and marking a top.
They are a fun pattern that describes Price Action after the fact...they are not stand-alone signals for entry because of their unpredictability.
PRANCING Pony - Another fun name for a particular reversal pattern that forms within a diamond.
I was inspired to name it after a Joni Mitchell tune...A more in depth description is available here.
* These items were learned in the early 2000's from Buffy in her live chat-room class (da.Charts.com).
The chat-room is no longer live but the archives are still functioning...a great learning center and idea generator.
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I maintain that the ideas presented throughout this blog 'work' in all markets.
Price action is price action regardless of the trading vehicle you chose.
Several years ago I was forced to remove equity from my brokerage account leaving less than the $25k that is required
so as not to run afoul of Pattern Day Trader rules. This effectively put an end to my ETF and equity trading.
So I gravitated to e-mini futures trading. The leverage is fantastic and the PDT restrictions do not apply to these markets.
Plus trading is available almost 24 hours. I have not gone back to trading equities ever since. Maintaining a relatively small futures account is much less stressful yet the potential rewards are as great or better than with equities.
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The chat-room is no longer live but the archives are still functioning...a great learning center and idea generator.
**************************************************************
I maintain that the ideas presented throughout this blog 'work' in all markets.
Price action is price action regardless of the trading vehicle you chose.
Several years ago I was forced to remove equity from my brokerage account leaving less than the $25k that is required
so as not to run afoul of Pattern Day Trader rules. This effectively put an end to my ETF and equity trading.
So I gravitated to e-mini futures trading. The leverage is fantastic and the PDT restrictions do not apply to these markets.
Plus trading is available almost 24 hours. I have not gone back to trading equities ever since. Maintaining a relatively small futures account is much less stressful yet the potential rewards are as great or better than with equities.
so as not to run afoul of Pattern Day Trader rules. This effectively put an end to my ETF and equity trading.
So I gravitated to e-mini futures trading. The leverage is fantastic and the PDT restrictions do not apply to these markets.
Plus trading is available almost 24 hours. I have not gone back to trading equities ever since. Maintaining a relatively small futures account is much less stressful yet the potential rewards are as great or better than with equities.
**************************************************************
Conventional Technical Analysis
There are a multitude of books and websites that describe the technical ins-and-outs of charting.
There are a multitude of books and websites that describe the technical ins-and-outs of charting.
Some are considered 'classics', going into great detail on market movements based
on observations, such as Technical Analysis of Stock Trends by Edwards and Magee.
on observations, such as Technical Analysis of Stock Trends by Edwards and Magee.
Reminiscences of a Stock Operator by Edwin Lef'evre tells a great fictionalized story
about the life and times of Jesse Livermore, one the most famous traders of all time.
about the life and times of Jesse Livermore, one the most famous traders of all time.
Other books delve into the underlying psychological reasons behind market action - see:
Trading For A Living by Dr. Alexander Elder and Trading in the Zone by Ari Keiv.
While these books are quite interesting and packed with information that any trader can benefit from, I am no
longer very interested in understanding "why" markets do what they do...I'm more focused on discovering ways
via trading to take advantage of continually repeating patterns that occur in all markets.
My 40 years of market participation and chart reading experience has confirmed the existence of these patterns.
Additional Trading Notes
Additional Trading Notes
