Sentiment Indicators (eBook)

ABE COFNAS is the forex trading columnist for Futures magazine since 2001 and has written over 100 columns on forex trading strategies and tactics. He is also the author of two Wiley titles, The Forex Trading Course and The Forex Options Course. He has, for over two decades, provided fundamental and technical analysis on trading strategies in currencies and inter-markets. He is the founder of learn4x.com, which provides private coaching and seminars on currency trading. In 2008, he formed FXDimensions Inc., a third-party trading system and signal development company that has pioneered the concept of Trading Avatars. He is a recognized expert in technical analysis and has lectured in London and Dubai (with appearances on CNBC Arabia) and continues to work with students and businesses abroad. Mr. Cofnas holds a master's in political science, and a master's in public policy from the University of California, Graduate School of Political Science, and the Goldman School of Public Policy, at the University of California, Berkeley.

Acknowledgments x

Introduction 1

The Decision Path of the Trader 3

1 The Geometry of Emotions and Price Action 9

Building Investor Emotional Intelligence 13

2 Price Break Charts: Key Concepts 15

High-Probable Entry Conditions 16

What are Price Break Charts? Basic Concepts 20

Reversal Distances: A Key Metric 31

Consecutive High and Low Close Sequences 32

Is the Reversal Serious? 36

3 General Trading Strategies for Applying Price Break Charts 39

Trading in the Direction of the Trend after a Counterreversal Block 39

Join the Trend after the Appearance of the First or Second Reversal Block 42

Fibonacci Resistance Confirmation 43

Countertrend Scalper 44

Always-In Strategy 45

Flip-Flop Reversal Entry 45

Momentum Trading--Six-Line Break 47

Price Break and Volume Data for Equity Charts 48

Multiple Setting Intervals and Price Break Charts 50

4 Applying Price Break Charts to Markets and Data 53

S&P 500: Price Break Chart Patterns Using the Day Chart 53

Crude Oil and Price Break Charts 54

Microdetection of Sentiment Reversals--The Use of Price Break Charts for Momentum Trading 57

Price Break and Tick-Level Price Action 59

Six-Line Breaks and Fibs 59

5 Channel Patterns, Cycles, and Price Breaks 61

Cycles and Price Break Charts 63

6 Multiple Market Applications of Price Break Charts 65

Contemporaneous Visual Correlation of Instruments 65

Volatility and Price Break Charts 69

Price Break Charts and Sentiment Data: Innovative Applications 72

Price Break Charts and the Global Financial Crises 76

7 Price Break Charts and Option Trading 91

Selecting Direction with Price Break Charts 91

Selecting the Strike Price 92

Risk Reversal Price Break Charts Analysis for Currency Traders 95

Price Breaks and Currency Volatility Smiles 98

8 Renko Charts Revived: The Microdetection of Sentiment 105

What is Renko Charting? 106

Tactical Trading Rules for Renko Charts 112

Key Components of a Renko Charts Trade 113

Step 1: Renko Chart Setting Sizes and Time Intervals 115

Step 2: Select Chart Time Interval: Use Three Time Intervals 120

Step 3: When a Trade Enters the Average Target of Profitability, Turn On the Renko Charts 121

Time and Bricks 122

Renko Charts and Economic Data Release Trading 124

Using Renko Charts to Enter Positions 129

Renko Charts in Multiple Markets 132

Renko Charts and Six-Line Break: Tools for the Scalper 132

Renko Bricks at the Tick Level 138

Renko and Volume 138

9 Kagi Charts: Waiting for the Turn of Sentiment 141

Kagi Chart Basics 141

Buy and Sell Signals with Kagi Charts--When Yin Turns to Yang 146

Kagi Charts: The Keys to the Turn of Sentiment 148

Quantifying Kagi Charts 151

Kagi versus Candlesticks--Which is Better? 152

10 Point and Figure Charts 155

How Point and Figure Charts Work 155

Variations in Settings in Selected Markets 162

Combining Chart Types 170

11 Integrating Price Break, Kagi, Renko, and Point and Figure Charting 183

Using the Price Landmark Matrix 183

12 New Directions in Sentiment Analysis: Charting Words 227

Decreasing Frequency Comparison 234

13 Beyond the Trend: Cycle Indicators Independent of Time 251

Cycle Detection and Projection 252

Epilogue 265

Index 267