Trading with Charts for Absolute Return

SUMMARY

Chapter 4 is dedicated to an absolute return strategy that is reliable and works in practical trading. This approach is based on a combination of 3-point trend lines and 4-point trend channels (with the exception of 5-point trend channels). In order to give readers the chance to completely understand how each trading signal is generated based on chart patterns, the underlying trading signals including the individual chart patterns are included on the companion Web site. There are 676 charts and trading signals shown for the five assets chosen to conduct the analysis.

This is the highest transparency that can be provided. Working with chart patterns is not as easy as pressing a key on a computer to generate trading signals. But many traders do not realize that developing a fully automated trading model for absolute return results is even more difficult than working with chart patterns—which means that these chart patterns offer at least a chance for absolute return results in everyday trading.

It takes skill, time, patience, and discipline to get used to drawing valid trend lines and trend channels as described. The biggest help will be the Fibotrader software included on the companion Web site to this book. This software makes drawing trend lines and trend channels easy once a trader gets used to it. In addition, the Fibotrader software can be used to find the best stop-loss points and profit targets.

This chapter consists mainly of five chart patterns:

1. 3-point trend ...