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Chapter 1 (Introduction to the Art and Science of Technical Analysis) introduces the reader to the general assumptions, approaches, and classifications associated with the application of technical analysis. It introduces the concept of the self-fulfilling prophecy and information discounting and deals with the issue of subjectivity in technical analysis.

Chapter 2 (Introduction to Dow Theory) introduces the basic concept of Dow Theory and its various tenets. It also deals with the current challenges and applicability of Dow Theory. Much of modern classical technical analysis is derived on the original assumptions of Dow Theory, and as such represents an important chapter.

Chapter 3 (Mechanics and Dynamics of Charting) describes the mechanics of chart construction and how price is quantized and filtered into OHLC data. The significance of OHLC data is dealt with in detail, including four different definitions of gaps. Charts are classified in terms of five different constant measures and how they are affected by the type of chart scaling employed. There is also a detailed discussion about how trade performance and reward to risk ratios are affected by the bid-ask spread, with respect to long and short entry and exit orders. Finally, various types of futures contracts are covered, focusing on rollover premiums and discounts, backwardation, contango, and back-adjusted and unadjusted futures charts.

Chapter 4 (Market Phase Analysis) deals specifically with market phase, describing the various phases via numerous technical approaches. It analyzes and interprets market phase in terms of volume and open interest action, chart patterns, moving averages, divergence, price momentum, sentiment, cyclic action, Elliott waves, and Sakata’s method. This helps the practitioner better anticipate and forecast potential phases in the market with more consistency.

Chapter 5 (Trend Analysis) deals with the various definitional issues associated with trend action. It also introduces the reader to the concept of wave degrees or cycles. It points out that the inability to identify wave degrees may very well result in ineffective technical analysis and trade performance. The chapter then covers the 16 important price action characteristics that will greatly improve the forecastibility of potential reversal and continuation in the markets. The bar stochastic ratio oscillator is also introduced. Price filters are discussed in detail and classified into three main categories. This is followed by the description of the various types of trade orders and their functions. The chapter also covers stoplosses and their relationship with proportional sizing. Trendlines, channel construction, fan lines, trend retracements, price gaps, trend reversal forecasts, and continuations are also covered in detail.

Chapter 6 (Volume and Open Interest) deals with volume and open interest action and defines volume divergence with respect to price-based and non-price-based volume indicators. VWAP, volume filters, volume cycles, and various volume oscillators are also discussed, pinpointing some of their weaknesses and possible solutions.

Chapter 7 (Bar Chart Analysis) covers bar chart analysis. It presents the reader various generic reversal and continuation setups with respect to single, double, triple, and multiple price bar formations. It also describes the significance of the 16 price action characteristics and how they can be employed to forecast potential price bar reversals and continuations in the market. Finally, various popular price bar formations are discussed via numerous chart examples.

Chapter 8 (Window Oscillators and Overlay Indicators) classifies indicators into window oscillators and price overlay indicators. Overlay indicators are further subdivided into numerical, geometrical, horizontal, and algorithmic indicators. The differences between static and dynamic indicators are also explained. The practitioner is then introduced to the seven main approaches to analyzing oscillators. Cycle tuned oscillators, multiple timeframe oscillator analysis, and various popular oscillators and indicators are described in detail.

Chapter 9 (Divergence Analysis) describes the application of divergence in technical analysis. Detailed coverage of the definitional issues helps clarify the confusion surrounding the topic. The practitioner is introduced to bullish, bearish, standard, and reverse divergence. Various explanations are also presented with respect to the functioning of reverse divergence. The concepts of double divergence, detrending, and signal alternation are also covered in detail. The chapter concludes with numerous chart examples illustrating the various forms of divergence in equities and commodities.

Chapter 10 (Fibonacci Number and Ratio Analysis) introduces the practitioner to Fibonacci ratio and number analysis. It covers Fibonacci retracements, extensions, expansions, and projections with numerous chart examples. All Fibonacci calculations are clearly explained and illustrated. The differences between numerically and geometrically based Fibonacci operations are also discussed. Guidelines for drawing Fibonacci retracements in single, double, and multiple leg retracements are covered in detail. Fibonacci price and time ratio analysis of Elliot waves are also explored. Various popular Fibonacci applications such as fan lines, channel expansions, and arc projections are illustrated via real-world charts.

Chapter 11 (Moving Averages) analyzes various moving averages, such as exponential, simple, and weighted moving averages. The practitioner is shown how to calculate various averages. The chapter extensively covers the seven main components and nine main applications of moving averages. Moving averages functioning as signals and triggers are also discussed.

Chapter 12 (Envelopes and Methods of Price Containment) covers price bands or envelopes and their various modes of price containment. The practitioner is introduced to the six main functions of a price envelope. The different forms of central value that may be adopted by an envelope and the construction of the upper and lower bands are also analyzed in detail. The practitioner is then shown how to tune the bands with respect to the dominant cycles in the markets. The five main forms of price containment are illustrated with suggestions for effective entry and exit of the bands.

Chapter 13 (Chart Pattern Analysis) discusses the application of chart pattern analysis. A detailed breakdown of the classification of chart patterns is presented with specific examples. There is extensive coverage of the minimum measuring objective, conditions for pattern completion, and alternative price targets. The chapter concludes with the extensive treatment of many popular reversal and continuation chart patterns.

Chapter 14 (Japanese Candlestick Analysis) introduces the practitioner to Japanese candlestick analysis. Many of the most popular Japanese candlestick formations are presented and covered in detail. Japanese candlestick formations should be read within the context of the market, and this is achieved with reference to the 16 price action characteristics discussed extensively in this chapter. The practitioner is then shown how to integrate Japanese candlestick analysis with other forms of technical analysis, such as cycles, chart patterns, oscillators, Ichimoku Kinko Hyu charting, Fibonacci levels, volume action, and moving averages.

Chapter 15 (Point-and-Figure Charting) covers Point-and-Figure charting, focusing on the minimum continuation and reversal box size, vertical and horizontal counts, box filtering, and the effects of chart scaling, as well as coverage of the most popular point and figure formations.

Chapter 16 (Ichimoku Charting and Analysis) presents a powerful set of price overlay indicators, collectively referred to as Ichimoku Kinko Hyu charting. The chapter focuses on the construction, analysis, and application of the various overlays with special attention to the time displacement and lookback periods. Methods of trend identification, potential reversals, and continuations are also discussed with respect to the various Ichimoku overlays.

Chapter 17 (Market Profile) covers market profile charting. There is detailed treatment of the value area calculation, determination of the Point of Control via Time Price Opportunity (TPO) count and volume, as well as coverage of the various popular TPO distributions.

Chapter 18 (Basic Elliott Wave Analysis) introduces Elliott wave analysis with special focus on wave construction, alternation, truncations, impulsive and corrective wave formations, as well as the application of Fibonacci ratio and number analysis to the Elliott wave structure. The significance of pattern, time, and ratio is also discussed.

Chapter 19 (Basics of Gann Analysis) covers some of the most popular Gann techniques for forecasting potential price reversals, which includes the squaring of price and range, squaring of the high and low, the square of nine time and price projections, Gann lines, Gann retracements, and Gann grids.

Chapter 20 (Cycle Analysis) covers the basic elements of cycle analysis. The principle of summation, harmonicity, proportional commonality, nominality, variation, and synchronicity are covered in detail. Cycle inversions, translations, and the tuning of oscillators to the dominant cycle are illustrated clearly on various charts. The practitioner is also presented with five basic approaches to identifying cycles.

Chapter 21 (Volatility Analysis) discusses the five measures of market and price volatility. There is also coverage of the concept of normal and standard deviation, mean deviation, skewness, kurtosis, average true range, and stock beta. Plus there is discussion of the volatility indices and their application.

Chapter 22 (Market Breadth) covers the elements and factors that affect the reliability and consistency of market breadth analysis. Market fields and components such as its nine breadth data fields and eleven data operations are discussed in detail. Various popular market breadth indicators and their applications are then illustrated via numerous equity and commodity charts.

Chapter 23 (Sentiment Indicators and Contrary Opinion) introduces the topic of sentiment analysis and analyzes the behavior and psychology of the market participants. The chapter covers contrary opinion, irrationality, and necessary conditions for the reliability of sentiment indicators. Various popular sentiment indicators are examined with the appropriate charts.

Chapter 24 (Relative Strength Analysis) is about measuring the relative strength of one market against another. The directional implications and definitions such underperformance and outperformance are explained with various examples. The application of technical analysis to RS lines is examined and illustrated via numerous charts.

Chapter 25 (Investor Psychology) covers the basic elements of investor psychology. The chapter discusses how trends, consolidations, and market reversals develop with respect to various psychological and emotional biases. It also describes the underlying forces that create chart patterns in terms of the biases of investors and traders. Topics relating to cognitive dissonance and positive feedback loops are covered in detail.

Chapter 26 (Trader Risk Profiling and Position Analysis) introduces the practitioner to trader profiling. The practitioner is exposed to the concept of risk capacity and is shown that most market participants are usually both risk averse and risk seeking at the same time, with respect to price, time, and risk size. Trade orders based on behavioral profile are also discussed in detail. The collection of bullish and bearish indications across multiple timeframes is discussed in terms of the long, medium, and shorter term trader and investor.

Chapter 27 (Integrated Technical Analysis) introduces the concept of integrated technical analysis. It shows the practitioner how to effectively combine various technical tools to achieve better forecasts and trade decisions. It stresses the importance of identifying significant bullish and bearish clustering and oscillator signal agreements in order to locate high probability trades. Multiple timeframe analysis and multicollinearity are also discussed in detail.

Chapter 28 (Money Management) covers the elements of money management for traders. It classifies money management into passive and dynamic exposures. The four stochastic exit mechanisms are introduced and explained in detail. The concept of linear and geometric expectancy, asymmetric leverage, minimum winning percentage, and win-loss distribution are discussed from the perspective of improving trade performance. Familiarity with the concepts and disciplined application of passive and dynamic components of money management are essential skills for the long-term survivability as a trader.

Chapter 29 (Technical Trading Systems) introduces the practitioner to the basic elements of constructing, testing, and optimizing technical trading systems. It covers system conceptualization, system components, and performance measurement specifications.

Appendix A (Basic Investment Decision Making Based on Chart Analysis) illustrates how charts are employed to make trading and investment decisions. The practitioner is shown how to describe both the stock and the climate or environment in which the stock is trading in bullish and bearish terms and how to identify various participatory options available in the stock with respect to the client risk capacity and expectation.

Appendix B (Official IFTA CFTe, STA Diploma (UK), and MTA CMT Exam Reading Lists) provides a list the official IFTA CFTe, STA Diploma (UK), and MTA CMT exam reading requirements.

This book also includes an overview of the companion website and test bank.