Professional Documents
Culture Documents
Crash of 1987: More Chaos and the Resulting Order; The New York Stock
~xchange: How It Works; The Nasdaq Stock Market: How It" Works; The
American Stock Exchange LLC: How It Works; Let's Dissect the Indexes;
Wall Street as "The Animal House": The Bulls and the Bears, the Sheep and
the Hogs; Two Emotions That Rule the Markets (and Most ofthe Rest ofthe
World); Supply and Demand; Check Your Understanding; What Is "Center
Point"?; Center Point: You . .. A Golden BuddhaTHE RUNS TEST
When we do sampling without replacement from a deck of cards, we can
determine by inspection that there is dependency. For certain events (such
as the profit and loss stream of a system's trades) where dependency cannot
be determined upon inspection, we have the runs test. The runs test will tell
us if our system has more (or fewer) streaks of consecutive wins and losses
than a random distribution.
The runs test is essentially a matter of obtaining the Z scores for the win
and loss streaks of a system's trades. A Z score is how many standard deviations
you are away from the mean of a distribution. Thus, a Z score of 2.00
is 2.00 standard deviations away from the mean (the expectation of a random
distribution of streaks of wins and losses).
The Z score is simply the number of standard deviations the data is from
the mean of the Normal Probability Distribution. For example, a Z score of
1.00 would mean that the data you are testing is within 1 standard deviation
from the mean. Incidentally, this is perfectly normal.
The Z score is then converted into a confidence limit, sometimes also
called a degree of certainty. The area under the curve of the Normal
Probability Function at 1 standard deviation on either side of the mean
equals 68% of the total area under the curve. So we take our Z score and
convert it to a confidence limit, the relationship being that the Z score is a
number of standard deviations from the mean and the confidence limit is
the percentage of area under the curve occupied at so many standard
deviations.Returning now to our argument, it is rather inconceivable that the
traders in the cash market all started trading the same types of systems as
those who were making money in the futures market at that time! Nor is it
any more conceivable that these cash participants decided to all gang up on
those who were profiteering in the futures market. There is no valid reason
why these systems should have stopped working, or stopped working as well
as they had, simply because many futures traders were trading them. That
argument would also suggest that a large participant in a very thin market
be doomed to the same failure as traders of these systems in the bonds
were. Likewise, it is silly to believe that all of the fat will be cut out of the
markets just because I write a book on account management concepts.
Cutting the fat out of the market requires more than an understanding of
money management concepts. It requires discipline to tolerate and endure
emotional pain to a level that 19 out of 20 people cannot bear. This you will
not learn in this book or any other. Anyone who claims to be intrigued by
the "intellectual challenge of the markets" is not a trader. The markets are
as intellectually challenging as a fistfight. In that light, the best advice I
know of is to always cover your chin and jab on the run. Whether you win or
lose, there are significant beatings along the way. But there is really very little
to the markets in the way of an intellectual challenge. Ultimately, trading
is an exercise in self-mastery and endurance. This book attempts to detail
the strategy of the fistfight. As such, this book is of use only to someone who
already possesses the necessary mental toughness.The shooting star was the first
sign of trouble in Exhibit 6.28. The
next session's bearish belt-hold line confirmed a top. Another bearish
belt hold during the following week reflected the underlying weakness
of the market.
Exhibit 6.29 is an example of back-to-back bearish belt holds in mid-
February. The which ensued, was sharp, but brief as a bullish
morning star pattern spelled a bottom.The longer the height of the belt-hold
candlestick line, the more significant
it becomes. Belt-hold lines are also more important if they have
not appeared for a while. The actual Japanese name for the belt hold is
a sumo wrestling term: yorikiri. It means "pushing your opponent out of
the ring while holding onto his belt." A close above a black bearish
hold line should mean a resumption of the A close under the
white bullish belt-hold line implies a renewal of selling pressure.
Exhibit 6.27 shows how bullish belt-hold line 1 signaled a rally.
hold line 2 is interesting. It confirmed a tweezers bottom since it maintained
the prior week's lows. A rally ensued which ended with a harami
a few weeks later.
........... ..........
Hold 1
, 7/23/90
. Bullish Belt .
4830 Hold 2
4830
4759
4775- 'Ju 'Oc t 'Jan 'Jul
PBELT-HOLD LINES
The belt hold is an individual candlestick line which can be either bullish
or bearish. The bullish belt hold is a strong white candlestick which
opens on the low of the day (or with a very small lower shadow) and
moves higher for the rest of the day. The bullish belt-hold line is also
called a white opening shaven bottom. If, as in Exhibit 6.25, the market is at
a low price area and a long bullish belt hold appears, it forecasts a rally.
The bearish belt hold (see Exhibit 6.26) is a long black candlestick which
opens on the high of the session (or within a few ticks of the high) and
continues lower through the session. If prices are high, the appearance
of a bearish belt hold is a top reversal. The bearish belt-hold line is
sometimes called a black opening shaven headLibrary of Congress Cataloging-in-
Publication Data
Nison, Steve.
Japanese candlestick charting techniques : a contemporary guide to
the ancient investment technique of the Far East Steve Nison.
p. cm.
Includes bibliographical references and index.
ISBN 0-13-931650-7
1. Stocks-Charts, diagrams, etc. 2. Investment analysis.
I. Title.
1991 90-22736
This publication is designed to provide accurate and authoritative information
in regard to the subject matter covered. It is sold with the
understanding that the publisher is not engaged in rendering legal,
accounting, or other professional service. If legal advice or other expert
assistance is required, the services of a competent professional
person should be sought.
From a Declaration of Principles Jointly Adopted by
a Committee of the American Bar Association
and a Committee of Publishers and Associations
by Steve Nison
All rights reserved. No part of this book may be reproduced in any
form or by any means without permission in writing from the publisher.
New York Institute of Finance
Simon Schuster
Printed in the United States of America
1 0Website: www.TradeNavigator.com
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Phone: 1-800-808-3282
Phone: 1-719-884-0244
Markets Currently Available: Equities, forex, futures, and options. Contact this
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Market Analyst is a premier and first-class trading and investing ART platform. It
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Patsystems (Third-PartyInitial-Stop Trend Exits
Most trading systems use a moving average to determine an exit signal. Moving
averages are usually derivatives
of price and therefore do not represent the true realities of the market.
Furthermore, moving averages can be
adjusted with variables such as simple versus compounded moving averages.
In contrast to the moving average approach, with Pyramid Trading Points you are
trading with market realities.
You will set your stop-loss exit at the base leg of the pyramid. An exit signal is
generated if and when prices
reverse one tick past the base leg.
If prices reverse and go against you by passing the Pyramid Trading Point base leg,
then some new information
has come into the market causing the reversal (see Figure B.1 and Figure B.2). We
exit the trade based on price
activity, which is a truth of the market.
Trailing-Stop Trend Exits
WhenB.3 you can see how the ART software places bullish and bearish PTP signals on
your chart so you can easily see
the changing trend direction at all times.
FIGURE B.3 Bullish and Bearish Pyramid Trading Points
This chart illustrates bullish (triangles pointing upward) and bearish (triangles
pointing downward) Pyramid
Trading Points. On a color chart the bullish PTP signals would be colored green and
the bearish PTP signals
would be colored red.Résultats de recherche
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