Table of Contents
Preface xi
Acknowledgments xv
About the Authors xvii
Part I Introduction to Trading with Pattern Recognition
Chapter 1 Opening Thoughts 3
How to Use This Book 3
Succeeding or Failing in Trading 4
Steps to Take for Successful Trading 7
Chapter 2 Geometry of the Patterns and Fibonacci Ratios 9
History of Geometry in the Markets 11
Fibonacci Ratios 13
Applying the Fibonacci Ratios 15
Summary 18
Chapter 3 Harmonic Numbers and How to Use Them 19
Where the Term Harmonic Numbers Originated 19
Defining a Harmonic Number 20
Vibrations in Price Swings 22
Repetition in Price Swings 24
Finding Harmonic Numbers 28
Harmonic Numbers Found in Other Markets 34
Part II The Price Patterns and How to Trade Them
Chapter 4 The AB=CD Pattern 37
History of the AB=CD Pattern 37
AB=CD Pattern Description 39
AB=CD Pattern Structure 39
Important Characteristics of the AB=CD Pattern 42
CD Leg Variations 43
Slope and Time Frames 46
Psychology of the AB=CD Pattern 48
Trading the AB=CD Pattern 49
Chapter 5 The Gartley “222” Pattern 53
History of the Gartley “222” Pattern 53
Gartley “222” Pattern Description 55
Gartley “222” Pattern Structure 56
Important Characteristics of the Gartley “222” Pattern 57
Psychology of the Gartley “222” Pattern 59
Trading the Gartley “222” Pattern 60
Chapter 6 The Butterfly Pattern 67
History of the Butterfly Pattern 67
Butterfly Pattern Description 69
Butterfly Pattern Structure 70
Important Characteristics of the Butterfly Pattern 71
Psychology of the Butterfly Pattern 72
Trading the Butterfly Pattern 73
Chapter 7 The Three Drives Pattern 81
History of the Three Drives Pattern 81
Three Drives Pattern Description 82
Three Drives Pattern Structure 83
Important Characteristics of the Three Drives Pattern 84
Psychology of the Three Drives Pattern 84
Trading the Three Drives Pattern 85
Chapter 8 Retracement Entries and Multiple Time Frames 91
Fibonacci Retracement Entries 92
Fibonacci Retracement Pattern Structure 92
Trading the Fibonacci Retracement Pattern 95
Opening Price Retracement Setups 98
Market Setup for the Opening Price Retracement Trade 99
Trading the Opening Price Retracement Setup 100
Multiple Time Frames 103
Chapter 9 Classical Technical Analysis Patterns 113
A Brief History of Technical Analysis 114
Basics of Technical Analysis 115
Double Bottom and Top Patterns 115
Head and Shoulders Pattern 120
Broadening Top and Bottom Patterns 126
Chapter 10 Learning to Recognize Trend Days 131
Identifying a Trend Day 132
Patterns Found on Trend Days 135
Fibonacci Ratios on Trend Days 138
Controlling Risk on a Trend Day 140
Trading a Trend Day 141
Part III Essential Elements of Trading
Chapter 11 Trade Management 149
Thinking in Probabilities 150
Warning Signs and Confirmation Signs 151
Money Management 155
Chapter 12 Using Options with the Fibonacci Ratios and Patterns 161
Call and Put Options Defined 161
Factors That Influence the Price of an Option 162
Controlling Risk with Options 163
Examples of Using Options with Extension Patterns 164
Chapter 13 Building a Trading Plan 167
Daily Trading Plan 168
Trading as a Business 174
Disaster Plans 177
Summary 181
Chapter 14 Daily Routines 183
Trade Preparation 183
Mental Preparation 187
Physical Preparation 188
Appendix 191
Index 195
