Trading Classic Chart Patterns [Hardcover]

Thomas Bulkowski (Author)

Book Description

ISBN-10: 0471435759 | ISBN-13: 978-0471435754 | Publication Date: March 29, 2002 | Edition: 1

Use popular chart patterns profitably
In his follow-up to the well-received Encyclopedia of Chart Patterns, Thomas Bulkowski gives traders a practical game plan to capitalize on established chart patterns. Written for the novice investor but with techniques for the professional, Trading Classic Chart Patterns includes easy-to-use performance tables, vivid case studies, and a scoring system that makes trading chart patterns simple. This comprehensive guide skillfully gives investors straightforward solutions to profitably trading chart patterns. Trading Classic Chart Patterns also serves as a handy reference guide for favorite chart patterns, including broadening tops, head-and-shoulders, rectangles, triangles, and double and triple bottoms. Filled with numerous techniques, strategies, and insights, Trading Classic Chart Patterns fits perfectly into any pattern trader's arsenal.

Thomas N. Bulkowski (Keller, TX), an active investor since 1981, is the author of the highly acclaimed Encyclopedia of Chart Patterns (Wiley: 0471295256) as well as numerous articles for Technical Analysis of Stocks & Commodities. Trained as a computer engineer, Bulkowski worked for over a decade at Tandy Corporation. Prior to that, he worked on the Patriot air defense system for Raytheon.

New technology and the advent of around the clock trading have opened the floodgates to both foreign and domestic markets. Traders need the wisdom of industry veterans and the vision of innovators in today's volatile financial marketplace. The Wiley Trading series features books by traders who have survived the market's ever changing temperament and have prospered-some by reinventing systems, others by getting back to basics. Whether a novice trader, professional or somewhere in-between, these books will provide the advice and strategies needed to prosper today and well into the future.

Editorial Reviews

From the Inside Flap

From the author of the Encyclopedia of Chart Patterns comes his latest work, Trading Classic Chart Patterns, a groundbreaking primer on how to trade the most popular stock patterns. Written for the novice investor but containing techniques for the seasoned professional, this comprehensive guide includes easy-to-use performance tables supported by statistical research. By using a simple scoring system, you'll learn how to predict the performance of a chart pattern almost by looking at it.

If you're new to chart patterns, technical analysis, or to stock market investing itself, the "Getting Started" section provides new ideas on trendlines, support and resistance, placing stops, and avoiding common investment mistakes. As your trading knowledge and experience increase, the "Trading Classic Chart Patterns" section will serve as a handy reference guide for your favorite chart patterns, including broadening tops, head-and-shoulders, rectangles, triangles, and triple tops and bottoms. You'll quickly learn about the Adam-and-Eve combinations of double tops and bottoms, and how to select the best performers while avoiding the losers.

You'll discover:
* How to use the price trend leading to a chart pattern as a gauge of future performance
* Why breakout gaps often improve performance-but by less than you think
* How tall formations perform substantially better than short ones
* What a partial decline is and how to buy in early for a larger profit
* Whether high breakout volume really improves performance
* How to identify horizontal consolidation regions that may stop prices dead in their tracks
* A new tool, called the horizon failure rate, to assess performance over time

The scoring system makes trading chart patterns simple. Use the performance tables to score your stock pattern, then add up the scores. If they total above zero, the stock is an investment candidate; if they are below zero, you'll know to avoid that particular stock. It's that easy!

Trading Classic Chart Patterns is a trader's reference that's destined to become a classic. This book is an invaluable resource that provides the obvious answer-Yes!-for every investor who has wondered if trading chart patterns can be profitable.

From the Back Cover

A practical solution for profitably using popular chart patterns

In his follow-up to the well-received Encyclopedia of Chart Patterns, Thomas Bulkowski gives you a practical game plan to capitalize on established chart patterns. Written for the novice investor but with techniques for the professional, Trading Classic Chart Patterns includes easy-to-use performance tables, vivid case studies, and a scoring system that makes trading chart patterns simple. This comprehensive guide skillfully gives you straightforward solutions to profitably implementing chart patterns.

"No one-not even the pioneers of technical analysis like Dow, Schabacker, Edwards, and Magee-has ever published such in-depth and objective research on chart patterns as Thomas Bulkowski has in his Encyclopedia of Chart Patterns and his new book, Trading Classic Chart Patterns. Bulkowski sees farther, not only because he stands on the shoulders of those giants, but also because he has the creativity necessary to develop new methods of quantifying the performance of chart patterns and the tenacity required to carry out the laborious research. Highly recommended!"
-Thomas A. Bierovic, author, Playing for Keeps in Stocks & Futures: Three Top Trading Strategies That Consistently Beat the Markets

Trading Classic Chart Patterns also serves as a handy reference guide for favorite chart patterns, including broadening tops, head-and-shoulders, rectangles, triangles, and bottoms. Filled with numerous techniques, strategies, and insights, Trading Classic Chart Patterns fits perfectly into any pattern trader's arsenal.

See all Editorial Reviews

Product Details

• Hardcover: 456 pages
• Publisher: Wiley; 1 edition (March 29, 2002)
• Language: English
• ISBN-10: 0471435759
• ISBN-13: 978-0471435754
• Product Dimensions: 10.1 x 7.5 x 1.4 inches
• Shipping Weight: 2.1 pounds (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (14 customer reviews)
• Amazon Best Sellers Rank: #736,705 in Books (See Top 100 in Books)

More About the Author

Thomas N. Bulkowski is recognized by many as one of the world's leading authorities on chart patterns. He is a successful investor and trader with nearly thirty years of experience trading stocks. He is also the author of the books Encyclopedia of Candlestick Charts; Encyclopedia of Chart Patterns, Second Edition; Trading Classic Chart Patterns; and Getting Started in Chart Patterns. His best selling books have been translated into six languages. One hundred articles of his have been published in Active Trader; Stocks, Futures and Options; The Technical Analyst; Traders'; The Trader's Journal and Technical Analysis of Stocks & Commodities magazines.

Before earning enough from his investments to "retire" from his day job at age thirty-six, Bulkowski was a hardware design engineer at Raytheon, a senior software engineer for Tandy Corporation, and a software manager for Tracor-Westronics.

He was the vice president of membership and later treasurer of the Keller Chamber of Commerce, chairman of the Keller Parks and Recreation board, president of Keep Keller Beautiful, vice president of the Friends of the Keller Library and charter member of the Keller Writers' Association. He also authored the Keller Recycling Task Force report and Park System Study for the City of Keller.

In his spare time, he likes to wander around his back yard looking for toads, spiders, snakes, and other inhabitants and then photograph them, occasionally play guitar while watching birds visit the bath or feeder, putter around in his garden, read and write fiction, and sneak up on his dog.

Customer Reviews

Most Helpful Customer Reviews

81 of 84 people found the following review helpful:

5.0 out of 5 stars Author's comments, April 2, 2002

By 

Thomas Bulkowski - See all my reviews

This review is from: Trading Classic Chart Patterns (Hardcover)

I wrote the book for novice investors with useful information for the seasoned pro. The Getting Started section explores Trendlines (including internal trendlines and tails, point spacing, number of touches, length, angle, volume), backed up by performance statistics for each; Support and Resistance (round number, moving average, chart pattern, trendline, old high/old low, horizontal consolidation region, including price prediction); Stops (various types including beta-adjusted trailing stops); and common trading mistakes.

Chart pattern reference section: Each chapter examines one pattern type and describes the chart pattern as it behaves under various conditions. I score performance in easy to use and understand tables. For example: Diamonds with downward breakouts occurring in small cap stocks have declines averaging 27% (score: +1), mid caps decline 23% (score: +1), and large caps decline 19% (score: -1). If the diamond chart pattern you're looking at is in a mid cap stock, then it scores +1. Continue scoring your chart pattern using the other eight tables and total the scores.

Totals above zero suggest performance above the median; totals below zero suggest underperformance. Patterns with totals greater than zero typically perform two to three times better than those scoring less than zero. No guarantees, but the method tends to highlight stock chart patterns that will do well and discards those that won't. Think of the scoring method as another checklist to consult before trading, not as a trading system replacement, so you can continue using the investment tools most comfortable to you.

Case studies in each chapter walk you through applying the method to your chart pattern and discuss actual trades I made, where possible.

Statistics Summary and Analysis at the end of the book compares the performance results in sixteen tables for both bullish and bearish chart patterns.

Glossary and Methodology defines terms and statistical methods so you can reproduce the results yourself.
There is almost no overlap between this book and my prior one, "Encyclopedia of Chart Patterns" (Wiley, 2000)....

77 of 80 people found the following review helpful:

5.0 out of 5 stars Masterful Analysis of Chart Patterns, November 12, 2002

By 

L. Masonson (Monroe, New York USA) - See all my reviews
(REAL NAME)   

This review is from: Trading Classic Chart Patterns (Hardcover)

This 439-page book is authored by Thomas Bulkowski, a successful full-time investor and trader for over 20 years. In his spare time, he previously penned the Encyclopedia of Chart Patterns (2000). For those investors and traders who want to know the performance characteristics of specific popular chart patterns, this book provides the nuts-and-bolts.

The book is not light reading and requires a great deal of concentration if you expect to get the most out of it. If you are beginning investor or trader then you may want to wait a bit until you've mastered you chart patterns and terminology before delving into this book. If you like statistical data and like to work with numbers, then this book will make you happy. Each chapter on the chart patterns follow a similar template so that you know what to expect in future chapters as far as format is concerned.

The book is divided into two parts. Part I (85 pages) presents new research on trendlines, support and resistance, placing stops, selling considerations, and common trading mistakes. Part II (about 300 pages) reviews in detail 14 chart patterns (market tops and bottoms, head-and-shoulders, rectangles, triangles and scallops - rounded bottoms). Bulkowski also provided a 19-page summary of the bullish and bearish patterns with their performance statistics. Also included is a 9-page glossary and the methodology used to determine the statistics for each pattern.

To give you flavor as to one of Bulkowski's findings, consider the most bullish trading patterns. He found the best performance was the descending triangle pattern with an upside breakout. He found the average rise after the breakout for a short-term pattern was 49%. The next best was breakouts from an intermediate-term rectangle pattern with a 42% average rise. And long-term triple bottoms can in third with a return of 41% after breaking out

He looked at the most popular patterns and found the characteristics that make them tick.
Bulkowski developed a chart pattern scoring system that helps select better performing chart patterns to trade. Scores above zero infer that the pattern will most likely beat the median, while scores below the median infer that the pattern will be a non-performer. Bulkowski also includes a few case studies for each pattern to aid in the understanding of the patterns and scoring system.

Bulkowski suggests that you use the information in the book on the behavior of chart patterns with the scoring system, combined with your own research (such as how the industry group is behaving) and other technical and fundamental indicators to develop your own trading strategy.

Overall, Bulkowski presents a masterful text on the most-often used chart patterns. But instead of giving you generalities, he provides specifics based upon detailed statistical analysis. Knowing which patterns work best under which conditions will certainly put the odds of investment success in your favor. Therefore, I highly recommend this book to serious students of the market. This is money well-spent.

34 of 36 people found the following review helpful:

5.0 out of 5 stars Finally an excellent book on Chart patterns, April 20, 2002

By 

Des Hartman (Boca Raton, FL USA) - See all my reviews

This review is from: Trading Classic Chart Patterns (Hardcover)

I'm a software developer writting a program to do chart patterns. I used his first book, but there were conceptual pieces missing. This book fills in the gaps and more. This is an excellent buy and well worth the money! If you are serious about Chart Patterns, then I would suggest this book as a first read and then the encyclopedia of Chart Patterns as a reference. Good humor in the book as well. I like that.