Synopses & Reviews
A key element of trading is identifying situations in the financial markets that can produce profits. The technical analyst tends to achieve this goal by looking at patterns in the markets that historically indicate the direction of the markets' next move.
Author Tim Knight—founder of Prophet Financial Systems and the popular blog SlopeOfHope.com—has been involved in trading for a quarter century, experiencing everything from the Internet boom and dot-com crash to the housing bubble and the Great Recession. For almost that entire time, he's successfully used charts and technical analysis as the basis for his investing decisions. Now, with High-Probability Trade Setups, he shows you how to do the same.
Divided into three comprehensive parts, this reliable resource opens with an informative overview of chart setups and offers a solid introduction to the principles and philosophy of technical analysis. After providing you with a firm understanding of these essential issues, Knight turns his attention to the main focus of the book, which is historical price patterns, their results, and their nuances.
Chapter by chapter, Knight presents detailed explanations of twenty powerful patterns, using real-world examples that will help you understand their behavior and apply them to your everyday trading endeavors. Each chapter in Part Two of the book is structurally the same—introduction to a pattern, definition of the pattern, psychology behind the pattern, examples, and summary—so you can quickly gain valuable insights on patterns of particular interest to you. Some of the setups covered include chart patterns such as:
Part Three of this practical guide rounds out the discussion by outlining some critically important rules of today's trading road and sharing some valuable knowledge on short selling.
Making money in the market isn't easy, but it is possible. With High-Probability Trade Setups as your guide, you'll discover exactly what it takes to chart your way to more consistent and profitable trading.
Synopsis
High Probability Trade Set-Ups will provide a detailed explanation of about 40 powerful, recurring tradable situations in the financial markets. The trade-set ups will derive from traditional bar chart patterns, candlesticks, fundamental events, and other technical indicators. Each pattern will be thoroughly described, including its strengths and drawbacks; ease of identification; and the degree to which it produces profitable trades. Importantly, the author will provide entry and exit points for each set up. Examples of the set-ups are chart patterns such as ascending triangles; candlesticks patterns such as shooting stars; and fundamentally based set-ups deriving from earnings surprises. In addition, the author provides a resource guide which discusses a variety of web-based chart and software applications that a reader can use to monitor the market for the trade set-ups discussed in the book.
Synopsis
A comprehensive volume of today's most profitable trade set-upsA key element of trading is identifying situations in the financial markets that can produce a profitable trade. Fundamental analysts search for situations where a stock is undervalued or if a stock's prospective earnings growth is underestimated by a majority of investors. Technical analysts look at patterns in the market that historically indicate the direction of the markets next move. High Probability Trade Set-Ups catalogs the best trading situations from a variety of technical approaches.
Engaging and informative, High Probability Trade Set-Ups provides a detailed explanation of twenty powerful, recurring tradable situations in the financial markets. Each pattern is thoroughly described, including its strengths and drawbacks, ease of identification, and the degree to which it produces profitable trades. Most importantly, the author provides entry and exit points for each set up. Examples of the set-ups include chart patterns such as ascending triangles, diamonds, gaps, pennants, and channels.
- Features many new technical tools for tracking individual stocks
- Contains a resource guide, which will help to monitor the market for the trade set-ups discussed throughout the book
- Reveals how to use ProphetCharts to perform advanced intermarket technical studies and identify the best opportunities
Written in a straightforward and accessible style, High Probability Trade Set-Ups covers a lot of ground with respect to this approach and shows you how to use it to make the most of your time in today's dynamic markets.
Synopsis
Praise for HIGH-PROBABILITY TRADE SETUPS"Technical analysis, in Tim Knight's way of thinking, is not just focusing on a chart and drawing lines. Rather, it's providing special market insight from years of trading. Tim's latest book makes me feel like I missed something in my own development as a trader and I want to learn more."
—Tom Sosnoff, founder of thinkorswim.com and current CEO of tastytrade.com
"Technical price patterns give traders an edge in any market, but it is a technique that is full of nuances that can be challenging for new traders. High-Probability Trade Setups explains the patterns you need to understand, and fully explains the details of why they work the way they do. Tim Knight is uniquely qualified to provide the detail that is always just skimmed over by other authors. He is one of the pioneers of computerized and Internet charting and has been studying technical patterns as a market professional since before most of today's traders opened their first brokerage account. If you want to fully understand the process of using technical patterns to find and execute successful trades, then I couldn't recommend this book more enthusiastically."
—John Jagerson, founder of LearningMarkets.com and author of All About Investing in Gold
"Tim's latest book shares his lifetime of knowledge with traders who appreciate and utilize charting and technical analysis as a critical component of developing and executing their trading strategies. With High-Probability Trade Setups, Tim adds another volume to what has become a living library of technical analysis for everyone from the beginning investor seeking an education as to the meaning of technical analysis to this latest edition which is for the more active—but still learning—trader who wants to understand the more sophisticated charting patterns and how to use them profitably. Tim lives, eats, and breathes technical analysis and charting, and I recommend this book to all investors."
—Lee Barba, former CEO, Investools
About the Author
Timothy Knight is the founder of Prophet Financial Systems (now owned by Ameritrade), which has been rated by Forbes and Barron's as the number one online site for technical analysis. He also operates a highly successful trading blog, SlopeOfHope.com. Prior to starting Prophet.net, Knight was vice president of technology products for Montgomery Securities, where he helped develop PC-based trader workstations before the development of web trading. Knight has traded for more than twenty years, primarily using technical analysis and price charts. He is also the author of both editions of Chart Your Way to Profits (Wiley).
Table of Contents
About the Author xiii
PART I An Overview 1
CHAPTER 1 A Primer on Chart Setups 3
The Bulls versus the Bears 4
Why Is a Prediction Valuable? 4
A Word on Shorting 6
Support and Resistance 7
What Happens When Prices Punch Through? 8
History Repeats Itself 11
When Patterns Work Together 13
How to Use This Book 14
CHAPTER 2 My Personal Trading Journey 15
Earliest Interest in the Markets 15
Beginning with the Crash 16
Technical Tools 17
Prophet’s Beginning 18
The Internet Makes Its Appearance 18
Enter Alex and JavaCharts 19
Project Kandinsky 21
The Slope of Hope 22
Lessons Learned 22
ProphetCharts Lives 23
The Three Steps 24
PART II The Patterns 31
CHAPTER 3 Ascending Triangles 33
Definition of the Pattern 33
Psychology behind the Pattern 35
Examples 35
Summary 43
CHAPTER 4 Ascending Wedges 45
Definition of the Pattern 45
Psychology behind the Pattern 47
Examples 47
Summary 53
CHAPTER 5 Channels 55
Definition of the Pattern 55
Psychology behind the Pattern 57
Examples 57
Summary 68
CHAPTER 6 Cup with Handle 69
Definition of the Pattern 69
Psychology behind the Pattern 70
Examples 72
Longer-Term Examples 75
Summary 79
CHAPTER 7 Descending Triangles 81
Definition of the Pattern 81
Psychology behind the Pattern 83
Examples 83
Summary 89
CHAPTER 8 Descending Wedges 91
Definition of the Pattern 91
Psychology behind the Pattern 92
Examples 93
Summary 102
CHAPTER 9 Diamonds 103
Definition of the Pattern 103
Psychology behind the Pattern 105
Examples 105
Summary 110
CHAPTER 10 Fibonacci Fans 111
Definition of the Pattern 111
Psychology behind the Pattern 113
Examples 114
Summary 126
CHAPTER 11 Fibonacci Retracements 129
Definition of the Pattern 130
Examples 132
Summary 139
CHAPTER 12 Flags 141
Definition of the Pattern 141
Psychology behind the Pattern 142
Examples 143
Summary 153
CHAPTER 13 Gaps 155
Definition of the Pattern 155
Psychology behind the Pattern 157
Examples 158
Summary 174
CHAPTER 14 Head and Shoulders 175
Definition of the Pattern 175
Psychology behind the Pattern 176
The Importance of the Neckline 177
Examples 178
Summary 197
CHAPTER 15 Inverted Head and Shoulders 199
Definition of the Pattern 199
Psychology behind the Pattern 201
The Importance of the Neckline 202
Examples 202
Summary 215
CHAPTER 16 Multiple Bottoms 217
Definition of the Pattern 217
Psychology behind the Pattern 219
Examples 220
Summary 230
CHAPTER 17 Multiple Tops 231
Definition of the Pattern 231
Psychology behind the Pattern 233
Examples 233
Summary 241
CHAPTER 18 Pennants 243
Definition of the Pattern 243
Psychology behind the Pattern 244
Examples 245
Summary 253
CHAPTER 19 Rounded Bottoms 255
Definition of the Pattern 255
Psychology behind the Pattern 256
Examples 257
Summary 265
CHAPTER 20 Rounded Tops 267
Definition of the Pattern 267
Psychology behind the Pattern 269
Examples 270
Summary 278
CHAPTER 21 Support Failure 279
Definition of the Pattern 279
Psychology behind the Pattern 280
Examples 281
Summary 299
CHAPTER 22 Automatic Patterns 301
Patterns in ProphetCharts 302
Working with the Results 307
Pattern Failures 314
Putting the Patterns to Work 315
PART III Trading and You 317
CHAPTER 23 Setting Stops 319
General Guidelines 319
Below Support 320
Above Resistance 320
Above Trendline 321
Below Trendline 321
Most Recent Low 322
Most Recent High 322
Special Cases 323
CHAPTER 24 On Being a Bear 325
The Philosophy of Shorting 325
Practical Guide to Short Selling 326
Exchange-Traded Funds 328
Puts for Leveraged Profits 330
The Philosophy of Shorting 332
CHAPTER 25 A Guide to Real-Life Trading 337
Trading Rules 337
How to Open a Position 338
How to Hold a Position 341
How to Close a Position 343
Time and Money 343
There Is No Holy Grail 344
Closing Thoughts 345
Index 347