Technical Analysis Using Multiple Timeframes

I’ve been meaning to post up my review of Brian Shannon’s new book, Technical Analysis Using Multiple Timeframes, for quite some time but as I have already mentioned, my schedule has been crazy. Well, I was able to sit down and write a brief but hopefully a helpful review.

The book starts with a chapter on technical analysis which I recently listed as one of the 10 steps to profitable trading. I agree with Brian 100% that any person that wishes to become a successful trader must learn and start to master some aspect of technical analysis. He clearly identifies that technical analysis is not about memorizing chart patterns or funky images but about understanding the motivations of participants which may help in anticipating future moves. This is a game of anticipation more so than speculation if you play by a set of rules and attempt to do it professionally. Overall, Brain nails the point that technical analysis allows a trader to view the market with some type of clarity (this may differ from one person to another – especially in multiple time frames).

He says: “price is the only thing that pays”. Very simple but true. All the tools and gadgets in the world can’t and won’t help you trade more efficiently than using simple price action which can be monitored through charts or technical analysis. He says, in other words of course, that technical analysis is not an exact science and will not predict every move but it should allow an experienced trader make sense of the movement(s) they are viewing.

I loved the first chapter because I felt I was reading my own thoughts (almost word for word).

The next four chapters focus on the four stages of a stock’s cycle or movement (in Brian’s opinion and I don’t disagree):
[Read more…]

Bernard M. Baruch

Wise quotes from Bernard M. Baruch:
I highly recommend the book (one of the best I ever read):
My Own Story – written by Bernard at the age of 87 in 1957.

Bernard Baruch was a stock market speculator who became a millionaire by age 30 in the early 1900’s and eventually a statesman and advisor to multiple Presidents during WWI and WWII.


Bernard Baruch was born in Camden, South Carolina to Simon and Belle Baruch. He was the second of four sons. His father Dr. Simon Baruch (1840-1921) was a German immigrant of Jewish ethnicity who came to the United States in 1855. He became a surgeon on the staff of Confederate general Robert E. Lee during the American Civil War and a pioneer in physical therapy. His mother’s Sephardic Jewish ancestors came to New York in the 1800s and were in the shipping business. In 1881 the family moved to New York City, and Bernard Baruch graduated from the City College of New York eight years later. He eventually became a broker and then a partner in the firm of A. Housman and Company. With his earnings and commissions he bought a seat on the New York Stock Exchange for $18,000 (~$458K in 2007 dollars). There he amassed a fortune before the age of thirty via speculation in the sugar market. In 1903 he had his own brokerage firm and had gained the reputation of “The Lone Wolf on Wall Street” because of his refusal to join any other financial house. By 1910, he had become one of Wall Street’s financial leaders.

  • A speculator is a man who observes the future, and acts before it occurs.
  • If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.
  • During my eighty-seven years I have witnessed a whole succession of technological revolutions. But none of them has done away with the need for character in the individual or the ability to think.
  • Age is only a number, a cipher for the records. A man can’t retire his experience. He must use it. Experience achieves more with less energy and time.
  • Do not blame anybody for your mistakes and failures.
  • Every man has a right to his opinion, but no man has a right to be wrong in his facts.
  • I made my money by selling too soon.
    I never lost money by turning a profit.
  • Most of the successful people I’ve known are the ones who do more listening than talking.
  • Never pay the slightest attention to what a company president ever says about his stock.
  • Whatever failures I have known, whatever errors I have committed, whatever follies I have witnessed in private and public life have been the consequence of action without thought.

Please note that these simplified quotes don’t even scratch the surface of the contents of this book – it may even be an insult to list so few.

Summer Reading List

Learning about Stocks (Fundamental and Technical Principles):

System Development and Market Psychology:

Great All-around Reads:

All Others:

Trend Following

I would like to focus on several excellent questions discussed
by Michael Covel in his book:
Trend Following: How Great Traders Make Millions in Up or Down Markets

1. How do you determine what market to buy or sell at any time?
2. How much of a market should you buy or sell at any time?
3. How do you determine when to enter a market?
4. How do you determine when to exit a losing position?
5. How do you determine when to exit a winning position?

However, I would like to structure these questions specifically to the stock market (for the purpose of this blog audience) and answer them to the best of my abilities while anticipating comments from readers (for your answers):

1. How do you determine what stock to buy or sell at any time?
Hint: Stock Screens & Scans

2. How much of a stock should you buy or sell at any time?
Hint: Position Sizing and Expectancy

3. How do you determine when to enter a stock?
Hint: Risk/ Reward strategies

4. How do you determine when to exit a losing position?
Hint: Sell Strategies

5. How do you determine when to exit a winning position?
Hint: Taking Profits

I will follow up with detailed answers after you give the questions some thought. Hint: Answers to these questions are all over the blog – see categories and the archives for further clues.

Weekend Reading

I just finished listening to the audio books of Liar’s Poker and When Genius Failed. Fascinating stories if you ask me. I don’t know why it took me so long to read/ listen to both of these books.

Per Wikipedia:
When Genius Failed: The Rise and Fall of Long-Term Capital Management tells the story of Long-Term Capital Management (LTCM), an American hedge fund which commanded more than $100 billion in assets at its height. Among LTCM’s principals were several former university professors, including two Nobel Prize-winning economists.

Between 1994 and 1998 the fund showed a return on investment of more than 40% per annum. However, its enormously leveraged gamble with various forms of arbitrage involving more than $1 trillion dollars went bad, and in one month, LTCM lost $1.9 billion.

Per Wikipedia:
Liar’s Poker is a non-fiction, semi-autobiographical book by Michael Lewis describing the author’s experiences as a bond salesman on Wall Street during the late 1980s. First published in 1989, it is considered one of the books that define Wall Street during the 1980s, along with Barbarians at the Gate and the fictional The Bonfire of the Vanities by Tom Wolfe.

Many of the same characters that show up in When Genius Failed were first mentioned in Liar’s Poker while working for Salomon Brothers in the 1970’s and 1980’s (John Meriwether being the prime character in both books).

I highly recommend both books for the exciting stories they tell rather than any trading knowledge that you would gather.

For a fictional look at this era on Wall Street, I highly recommend The Bonfire of the Vanities by Tom Wolfe.