Fly Fishing the Stock Market: How to Search for, Catch, and Net the Market's Best Trades

WHAT GOES INTO THE TOOLBOX

There are vast numbers of charting techniques and concepts. Do I use a bar or a candlestick chart? Do I use a weekly, daily, or intraday chart—or even all three? How do I layer them? Do I use different ones at different times?

The key principle is this: first take in the big picture, approach the market from a broad perspective, and decide whether it is bullish or bearish. Afterward, proceed to analyze its details for timing entries and exits.

It is like listening to a symphony first and later becoming familiar with the contribution of each instrument to the overall sound. The violin, for example, does not provide the orchestra sound—only an element of that sound. A lone indicator in a single time frame offers a message, but it does not offer the entire message of what and how to trade. Each well-selected indicator sheds light on a part of the whole. Combining several tools and time frames helps you see a harmonious connection between the messages of different indicators and decide what and when to buy or sell.

A chart is to a trader what a fly rod is to a fisherman. The rod connects all the parts. It enables you to cast, hook, and play the fish. Let us examine our rod—our chart—before moving on to what is attached to it.

What follows is a brief introduction to some of the chart patterns and indicators I use on a daily basis. I am not offering it to you as a course on technical analysis. This chapter does not describe my complete method—that comes later. ...