How much do you know about Technical Analysis?
Here you will find valuable information on chart patterns that are the staple of technical analysis and the ones we at Breakpoint Trades use every day. You will also find a basic description of the chart pattern, along with many examples of stocks that exhibit good examples of these patterns. It is my belief that one learns by seeing lot’s of examples, rather than one or two ‘text book’ examples. Therefore, I will be continually adding the best real chart examples that have been profiled on Breakpoint Trades along with others that I might find over time.
Also, you will find something here that is very useful – statistics on chart patterns! For instance, have you ever wondered what is the probability that an ascending triangle will breakout to the upside? What is it’s failure rate? What is the average percent rise I can expect, or how many ascending triangles on average will hit their price targets and in what time frame? Knowing the statistics and probability of chart patterns will give you, the trader, a very powerful advantage.
For instance, if you know the statistics, you will know what type of money management system you should use, i.e. you can incorporate various investment strategies to vary your investment by progession or regression. Also, knowing the statistics makes it easier to stick to a system to maximize your profits by trading objectively and not fall prey to one’s emotion. Most novice traders lose money because they hold on to losers too long and sell their winners too quickly. This problem stems from uncertainty. Statistics can help take away this uncertainty and help you trade more objectively.
All the statistical information for the chart patterns is referenced form the book: Encyclopedia of Chart Patterns by Thomas N. Bulkowski – Publisher: John Wiley & Sons. Click the title to buy this excellent book. I recommend everyone buy this book. It does in-depth statistical analysis on 50 different chart patterns over a 6 year period from 1991 to 1996. Please note that the various chart sections attempt to summarize the most important statistical information in Bulkowski’s book, and are not a replacement for the huge amount of information found in the book. Also the statistics are probably biased to the time frame of study, and may not be totally applicable to today, however they are probably close enough to be very useful.