Pattern recognition and trading decisions

370 Pages·2004·2.982 MB·English

by  Satchwell, Chris

PATTERN RECOGNITION
AND TRADING DECISIONS
CHRIS SATCHWELL
McGraw-Hill
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DOI: 10.1036/0071454802
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To the memory of my parents
John and Ivy
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D I S C L A I M E R
The behavior of financial instruments can be unpredictable, and invest-
ments in them, or the income they yield, can go down as well as up. This
book attempts to describe general techniques used by professional investors
to minimize risks and improve returns, but they are based on historical
experience, may be subjective, and, at best, work only for part of the time.
While there may be an expectation that the techniques will continue to work
for enough of the time to be useful, market conditions change constantly, and
there is no guarantee that they will do so or that they will necessarily pro-
duce a correct or useful result for a specific decision.
Specific securities are referred to in this book for illustrative purposes
only, and comments made should not be taken as a guide to their current
condition or future prospects.
The attached CD ROM contains educational material, a chart pattern
library, and PC-based software for illustrative purposes. It comes without
help or support, and it may be less reliable than commercial software pack-
ages. Neither the publisher nor the author accept legal responsibility for any
content of this book or associated CD ROM. If accountable software is
needed, an appropriate commercial product should be purchased. If account-
able financial advice is needed, it should be purchased from an appropri-
ately qualified and regulated person or organization.
Views expressed in this work are those of the author and do not nec-
essarily reflect the corporate views of organizations with which he is, or has
been, associated.
v
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vi DISCLAIMER
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C O N T E N T S
PREFACE xi
ACKNOWLEDGMENTS xv
PART ONE
MARKETS AND DECISIONS
Chapter 1
Introduction 3
Chapter 2
Behavior of Financial Instruments 7
Chapter 3
Investment Psychology 33
Chapter 4
Background to Investment Decisions: Practice and Theory 59
PART TWO
FUNDAMENTALANALYSIS
Chapter 5
Introduction to Fundamental Analysis 81
Chapter 6
Introductory Fundamental Analysis 85
Chapter 7
Fundamental Analysis in Practice 105
vii
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viii CONTENTS
PART THREE
TECHNICALANALYSIS
Chapter 8
Introduction to Technical Analysis 125
Chapter 9
Technical Analysis without Formulas 133
Chapter 10
Indicators: Technical Analysis with Formulas 163
Chapter 11
Trading Patterns 195
Chapter 12
Forecasting Technologies and Their Limitations 217
PART FOUR
TRADING DECISIONS
Chapter 13
Introduction 237
Chapter 14
Exits 239
Chapter 15
Trends 251
Chapter 16
Contrarian Strategies 267