Traders and investors often think about how important it is to read and read books, websites, and all kinds of material in order to improve trading. We spend a lot of time reading, but how much time do we spend on real learning?
I’ve already talked about How to win the market and the trap of the best and it is very important to practice and learn from the market. In trading the phrase “An expert is the one who has made all the possible mistakes in his field” is fulfilled and therefore we must devote ourselves to learning from them.
The problem of the human being is that he tends to minimize the bad things of the past and then we forget that we have done well and that we have not. To solve this problem Thomas N. Bulkowski decided to make himself a kind of complete statistic of each and every one of the formations from the chartist analysis you found. His conclusions and statistics are found in a book of more than 1000 pages called Encyclopedia of chart patterns.
Bulkowski was investing in the stock market while working as an engineer until at the age of 36 he had earned enough to retire. I think teaching a little of your book will be a good way to understand how statistics are made to achieve a trading system with positive mathematical hope.
Always study the bullish and bass breaking patterns separately. In this case, study the pennants that have a bullish breaking. Translating a little we have:
- Break-even failure: Percentage of false breakages of chartist figures.
- Average Rise: Average growth after the figure is completed.
- Volume trend: Volume trend (either increasing, decreasing, or constant).
- Percentage meeting price target: Percentage by which the target price of the figure is reached.
Surprising findings: Surprising discoveries. I must admit that this part is my favorite, the detail of counting down to the smallest appreciation says a lot about their way of operating and understanding the market. In this case, he tells us that the pennants that look big and tall are better than the small and short ones. He also comments that pennants with decreasing volume have a better performance. Bulkowski devotes a section to determine that it is considered a pennant and not before giving numerous examples.
For a trend to have the strength the volume must be growing with it, if there is a movement against the trend and the volume does not follow it, then it is a movement that is not supported by professional money and therefore is a FALSE trend. Now it turns out that the chartist analysis tells us that the pennants are pauses in a trend and one feature of it is that the volume is decreasing. If you look at both branches have seen this peculiarity of the market and therefore it is foolish to study each of them thoroughly, the information is duplicated with other words.
Dedicate yourselves to doing things like Bulkowski, studying patterns, studying indicators, studying yourself in front of the market, but stop reading gurus books, blogs with magic indicators and work!
Don’t be afraid to be wrong!