<s> This tutorial was originally titled “A Technician’s Approach to Day Trading” and was recorded at theOnline Trading Expo
Technical Analysis for Short-Term TradersMartin J Pring
Copywrite 2000 Traders’ Library
The principal difference between DayTrading and other forms of trading isthe time frame.
Technical analysis assumesthat prices move in trends.
Trends have a tendency to perpetuate.
Look for the weight of the evidence;(several indicators, to indicate areversal.)
In technical analysis we are dealing inprobabilities, never certainties.
The Indicators
1. Peak and trough analysis
B
What constitutes a legitimatepeak or trough?
One and Two Bar Price Patterns
All one and two bar price patternsmust be preceded by a short-term upor down trend.
One and two bar patterns are usuallyshort-term reversal phenomena.
These patterns indicate exhaustion,where market psychology has reached ashort-term extreme.
Outside bars
Outside bars are reversal patterns thatindicate a change in sentiment.
Inside Bars
Inside bars indicate thatprevailing momentum has dissipatedbecause buyers and sellers are nowequally matched..
Two Bar Reversals
Two bar reversals indicate a dramaticchange in sentiment..
Key Reversal Bar
A very strong signal of areversal in sentiment.
Characteristics1. Price opens the bar strongly in the direction of theprevailing trend.2. Trading range of the bar is extremely wide.
3. Price should close at or close to the previous close.
The key reversal bar should beaccompanied by climactic volume.
Exhaustion Bars
Characteristics of Exhaustion Bars1. A wide trading range following a sharp price move.
2. The close is higher than the opening in a downtrendor the opening is lower than the close in an up trend..3. The close is more than half way up the bar in a downtrend, and more than half way down in an up trend.
Pinocchio Bars
Pinocchio bars give us a falseimpression of what is really going on.
Placing Stops
The order is executed immediately theprice is touched and there is noopportunity to second guess.
The disadvantage is that locals andmarket makers can "go" for your stop.
Advantages of Placing Stops1. Mentally preparing for the worst.
2. Decision more likely to be made with a morebalanced judgment.3. A correctly placed stop is usually executed at a betterprice.
For liquidation of long positions, thebest point to place a sell stop is belowsupport and for covering a short oneabove resistance.
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