Technical Analysis for Direct Access Trading: A Guide to Charts, Indicators, and Other Indispensable Market Analysis Tools

234 Pages·2001·0.92 MB·English

by  Rafael Romeu

TECHNICAL ANALYSIS
FOR DIRECT ACCESS TRADING
THE DIRECT ACCESS TRADER SERIES
• Understanding Direct Access Trading
by Rafael Romeu
• Tools for the Direct Access Trader
by Alicia Abell
• Mastering Direct Access Fundamentals
by Jonathan Aspatore with Dan Bress
• Direct Access Execution
by Simit Patel
• Trading Strategies for Direct Access Trading
by Robert Sales
• Technical Analysis for Direct Access Trading
by Rafael Romeu and Umar Serajuddin
TECHNICAL
ANALYSIS FOR
DIRECT ACCESS
TRADING
A Guide to Charts, Indicators, and Other Indispensable
Market Analysis Tools
Rafael Romeu
Umar Serajuddin
McGraw-Hill
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CONTENTS
Preface ix
One:Introduction 1
Two:Technical Analysis Basics 9
Why Electronic Direct Access Trading? 9
The Sea of Money:Where Are We? 13
Technical Analysis Defined 20
Resistance and Support Levels 24
Three:Technical versus Fundamental Analysis 35
The Efficient-Market Hypothesis, Fundamental Analysis, and
Technical Analysis 35
The Efficient-Market Hypothesis 42
Evidence on EMH 46
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vi Contents
Technical Analysis 50
Fundamental Analysis 54
Expected Growth Rate of a Company • Standard Company
Financial Indicators • Expected Dividend Payouts
• Riskiness • Aggregate Market Conditions
Conclusion 60
Four:Price Formations and Pattern Completion 63
Techniques for Determining Trends in Market Prices 63
Discerning the Movement of Stock Prices and the Trend 65
Trend Observation in Data 69
Reversal Formations 73
Head and Shoulders Formations 75
Volume 79
Gaps 81
Broadening Formations 83
Double Tops, Double Bottoms, Triple Tops, and
Triple Bottoms 85
Saucers 87
Rounded Tops 87
Triangles 88
Flags 91
Pennants 93
Wedges 93
Conclusion 94
Five:The Dow Theory 95
The Three Price Trends 100
Primary Trend • Secondary Trend • Minor Trends
The DJIA and DJTA Must Confirm 110
Volume Follows the Primary Trend 114
Other Concepts and Some Concluding Thoughts 116
Six:Moving Averages, Momentum, and Market
Swings 119
Moving Averages 119
Time Span and Moving Averages 126
Weighted Moving Averages 129
Contents vii
Moving Averages and Sideways-Trending Markets 132
Envelopes and Bollinger Bands 133
Momentum 137
Rate of Change • Advance-Decline Line • Relative Strength
Indicator • Accumulation-Distribution and On-Balance
Volume • Moving Average Convergence-Divergence • Arms
Index
Seven:Elliott Wave Theory 147
Main Principles of the Elliott Wave Theory 149
Wave Levels 153
Fibonacci Numbers 154
Forecasting with the Elliott Wave Theory:A Simple
Example 155
Impulsive Waves 157
Impulses • Diagonal Triangles/Wedges
Corrective Waves 160
Zigzags • Flats • Triangles • Double Threes and
Triple Threes
Alternation 166
Channeling 166
Volume 168
Reading Waves Right 170
Ratios among Waves 174
Timing and Fibonacci Numbers 176
Concluding Thoughts on Wave Theory 177
Eight:Questions and Answers 179
Glossary 205
Index 213
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PREFACE
Technical Analysis for Direct Access Trading is part of a six-book series
on direct access trading from McGraw-Hill. The series of books repre-
sents the first detailed look at every element of direct access trading for
individuals interested in harnessing the amazing changes occurring in the
world’s financial markets. All the books contain a clear and basic ap-
proach on how to take advantage of direct access to the markets for your
specific level of investing/trading. Direct access trading is for everyone,
and in this series of books, we show you how to take advantage of it if
you only place a couple of trades a year, if you are just starting to get
more active in the markets, or even if you want to be a day trader. Take
advantage of these revolutionary changes today, and start accessing the
markets directly with direct access trading. Good luck!
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