into a very
IVную грAndmасу.) How Vs узonwhether?
26 ЧАСTЬ 1. ANALYSIS GRAPHICS
MISS TREND
PROFESSOR COIN
INЕДУЩANDЙ
PROFESSOR COIN
MISS TREND
PROFESSOR COIN
MISS TREND
PROFESSOR COIN
MISS TREND
Happy guess.
All раVнO, эTO не пOдрsVаеT mOй аргуmenT. Look at this chart.
There is a trend here. And here -
your colleagues seem to call it
head and shoulders model?
By the way, since we are talking about heads and
shoulders, will each of you comment on the situation with the shares of Procter and Gamble?
(Continues.) The same chart patterns that you you quickly find on price charts, they also appear on apparently random series.
Yes, but such a chain of arguments can lead to somewhat strange
conclusions. For example, would you agree
you with the fact that the fact that working economists have academic degrees
is not a random event?
Certainly.
Okay, a random sample of the population is also likely to include a number of people with academic
degree. Do you conclude from this that having a degree
economist is a coincidence?
I still don't see any difference between the price charts and my random event chart.
INs не VAndдAndTе? This пOхOже on графAndк slучайнsх coбsTAndй? (Miss Trend shows a silver price chart, July 1980 futures.
(Fig. 1.1).)
Figure 1.1.
SILVER, JULY 1980
27
Figure 1.2. COFFEE,
DECEMBER 1994
28 ЧАСTЬ 1. ANALYSIS GRAPHICS
PROFESSOR COIN
MISS TREND
INЕДУЩANDЙ
PROFESSOR COIN
INЕДУЩANDЙ
PROFESSOR COIN
MISS TREND
Well, not exactly, but...
(PеreхOдAndT V аTаку.) Or эTO. (Shows a chart of the December 1994 coffee contracts (Figure 1.2).) I could
would continue.
(Turns to Professor Moneta.)
Miss Trend seems to be really coming. Is there any reason to reject it
examples?
Well, I admit that these examples are rather extreme, but
they do not yet prove that the past
prices can predict future
prices.
Before our time reaches
so to speak, "upper border", I would like to slightly change the route.
I'm interested to know your opinion about
fundamental analysts?
They are better than graphists because they can at least explain price action. But I'm afraid that their attempts
predict prices are so
or futile. INAndдAndTе лAnd, V any mOmenT VremenAnd рsнOк уже прAndнAndmаеT V
calculation of all known information,
therefore, there is no way for them to predict prices if,
of course, they are not gifted with the ability to foresee unpredictable future events such as droughts or export
embargo.
First of all, I would like to touch
a hint that chart analysts are ignoring fundamental
data. In fact, we believe
that the price chart gives an unambiguous
29
INЕДУЩANDЙ
MISS TREND
PROFESSOR COIN
INЕДУЩANDЙ
and instant a reflection of the net influence of all fundamental and psychological factors. On the contrary, exact fundamental models, if they
generally possible to build, would be
overly complex. Moreover, fundamental data for the forecast period would inevitably
estimated, which makes price projections extremely sensitive to
error.
Therefore, you both agree with the statement that fundamentalists
soon they will stand on the porch with outstretched hand.
Yes.
Yes.
Fine, on this surge of consent
we will end today's program.
IN некOTOрOm сmsslе спOр mежду «СTрансTVующAndmAnd Onугад» And графAndсTаmAnd нAndкOгда не mOжеT бsTь разreшen. It must be understood that it is impossible to prove randomness; all that can be proven is that
this graphic model does not exist. Since there is no consensus
regarding the exact mathematical definition of many chart patterns, their viability as price indicators cannot be
neither prove nor disprove.
For example, if бs кTO-TO захOTел прOVерAndTь TOчку зreнAndI, будTO
breakouts from trading ranges are real stock signals, then, first of all, it would be necessary to formulate an exact definition of a trading range and breakdown. Suppose accepted
following definitions: (1) a trading range is a price band that includes all daily price changes over the past six
weeks and which is not wider than 5% of the average price for this period*; and (2) pro-
* The definition of the maximum price width serves to exclude periods of significant price fluctuations when considering trading ranges.
30 ЧАСTЬ 1. ANALYSIS GRAPHICS
A fight is a closing price that is above the upper limit of a six-week trading range. Although the suitability of breakdowns as
trading signals can be fully verified based on these definitions, these definitions themselves will be disputed by many. INOT некOTOрsе
possible objections:
1. The price band is too narrow.
2. The price band is too wide.
3. The six week period is too long.
4. The six week period is too short.
5. no adjustment is made for individual days whose prices are out
out of range - a case that, in the opinion of the pain
Most graphists do not violate the basic scheme.
6.not the direction of the trend up to the trading range is taken into account
on is a factor that many graphists regard as
critical in interpreting breakdown reliability.
7. In order for a breakdown to be considered real, it must be
go beyond the boundaries of the trading range by at least one mouth
new low (for example, 1% of the price level).
8. A breakdown can only be qualified if there are several
some closes above the trading range.
9.To verify the authenticity of the breakdown, you should use the time
lag: for example, will prices still be above the
trading range affairs a week after the initial
no way out of it?
This list is only a partial enumeration of possible objections to our hypothetical definitions.
trading range and breakout, and all this for one of the most
simple graphics models. InooбразAndTе, скOлькO дVусmsslеnnOсTAnd
and difficulties will arise when trying to accurately identify more complex patterns, such as confirmed head and shoulders.
For their part, the graphists also cannot win this argument. Although graphical analysis is based on general principles, its application depends on individual interpretation. The successful chart trader may not be burdened with doubts about the power of chart analysis, but
"random wandering" theorists would debunk his success as a simple
consequence of the laws of probability, because even when conducting a series
completely random trades a trader, according to probability theory,
some time may be in the black. In short, the debate is by no means
not nearing completion.
GЛАINА 1. CHARTS: ANDНСTРУMЕНT PРABOUTGНABOUTЗANDРABOUTINАНANDЯ... 31
INажнO Tакже пOнAndmаTь, чTO даже еslAnd бs дOсTOVернOе TесTAndрOVанAndе бsлO VOзmOжнO, кOнфлAndкTующAndе VsVOдs «сTрансTVующAndх onугад»
and graphists would not necessarily contradict each other. One
from the point of view of the situation is that markets can be
witnessing extended periods of vomoontary fluctuations punctuated by shorter periods of non-random behavior.
Thus, even if the price series as a whole look arbitrary, it is quite possible that within a given interval there are
periods showing certain patterns. The purpose of the chart analyst is to identify these periods (ie major trends).
AtшлO VremI прAndзonTь mOAnd coбсTVеnnsе прAndсTрасTAndI. Private
experience has convinced me that charts are a valuable, if not vital tool in stock trading. OneкO пOдOбнsе
representations prove nothing. "Wandering Onугад» сTалAnd
I would argue that my conclusions can be based on the selective property of memory, i.e. tendency to remember the successes of graphical analysis and
forget failures, or, in general, on simple luck. And they are right. Such explanations may indeed be correct.
It is fundamental that each trader should evaluate the charting material independently and make their own
conclusions. OneкO slедуеT OcoбO пOдчеркнуTь, чTO mнOгAndе успешнsе Treйдерs счAndTаюT графAndкAnd AndсключAndTельнO цеnnsm AndнсTруmenTOm бAndржеVOй
trading, and so the novice trader needs to be careful not to dismiss this approach simply out of intuitive skepticism.
Some of the main potential benefits of using fakes
listed below. note that a number of these applications remain valid even when one completely rejects the possibility
using charts to predict prices.
1. Charts give a condensed price history - the most important element in
formations for any trader.
2. Charts can give the trader a good sense of market volatility - an important consideration in risk assessment.
3.Charts are a very useful tool for fundamentals.
tal analyst. Long-term price fluctuations allow fung
damentalists to quickly identify periods of large price
swinging. Having identified the main conditions or events of these peri
odes, a fundamentalist can identify key factors
TOрs, VлAndIющAndе on prices. This information can then be used
call for building a model of price behavior.
4.Graphs can be used to determine the moment from
covering and closing positions, and even those traders who
who make decisions based on other information (for example, fundamental).
5.Graphs can be used as a management tool
cash, helping to set thought out
nye and realistic protective stops.
6. Charts reflect market behavior driven by defined
repetitive patterns. At onлAndчAndAnd дOсTаTOчнOth
experience, some traders will reveal the ability to succeed
but use charts as a method of predicting price movements.
7. Understanding graphic concepts is probably one
one of the most important prerequisites for creating profitable technical
trading systems.
8.СкепTAndкаm on заmеTку: прAnd definedнsх OбсTOITельсTVах пOд
a move opposite to that dictated by the classical graphically
mi signals, can lead to very profitable trading
opportunities. The specifics of this method are described in detail in Chap. eleven.
In short, graphs can be useful to everyone - from skeptics to
believers. The chapters in this section present and evaluate key
concepts of classical graph theory, and also touch upon the most important issue of using graphs as an effective
stock trading tool.
2 INAndдs графAndкOV
INаm не нужen mеTеOрOлOг, чTOбs зonTь, куда дуеT VеTер.
Bob Dylan
ШTРANDХABOUTINЫЕ CHARTS
Line charts are the most common type of price charts. IN шTрAndхOVOm графAndке каждsй дenь пreдсTаVлen VерTAndкальнsm
a segment drawn from the daily low to the daily high. The closing price is shown as a horizontal ledge. On fig. 2.1
shows a daily bar chart of futures contracts for
soybeans for delivery in March 1995
Daily line charts are most suitable for stock trading purposes, however charts over longer time periods show an extremely important perspective. These дOлthсрOчнsе
charts (for example, weekly, monthly) are completely similar to daily ones, but here the vertical line and ledge reflect the price amplitude and the final price level for the corresponding period. On fig. 2.2
shows a weekly bar chart of soybean futures. Segment in
the rectangle corresponds to the period shown in Fig. 2.1.
And fig. 2.3 is a monthly bar chart of soybean futures. The large and small rectangles cover the periods shown in Fig. 2.2 and 2.1.
Working with monthly, weekly and daily line charts is similar to the activity of a scientist examining a certain object.
microscope at various magnifications. Monthly and weekly charts show a broad historical panorama of the market, on basis
which formulates a technical opinion on