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| Articles and Tutorials |
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| "Body Posture" |
| by Ryan Litchfield |
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Mom always said "Stand up straight… don't slouch". Your posture was easy top read and she wanted you to look alert and motivated. Sloppy posture and drooping shoulders sent a message that suggested lack of ambition and drive. She wanted you to grow up strong and successful. Posture said a lot about your attitude and outcome.
I am a very visual person and I like to speak in analogies where I can relate complex concepts to ordinary realities. In charting I often add qualifiers and adjectives to my descriptions for students. The charts are simply a reflection of the attitudes and behaviors real people trading real money for real equities, commodities, options etc. The chart patterns are often given physical characteristics to describe their implications. Even names can suggest expected behaviors, particularly in candlestick patterns. Human behavior is full of patterns and I would like to take one example and walk you through the different variations it can take. Relating this to posture and the common experience of virtually everyone's childhoods can help us to better learn and retain information.
Let's look at some of the most recognized reversal patterns, the multiple top and bottom reversals. Double tops and bottoms are often called M's and W's while the revered Head and Shoulders pattern along with it's reciprocal the Reverse Head and Shoulders are formed by three tops or three bottoms.
Double tops and bottoms are formed as a retracement fails to follow through with a convincing next leg of the directional move. Often the pull back breaks or threatens to break the directional trend.
The double tops can come in several variations and the different postures carry an indication of the strength of the reversal pattern.
Double bottoms also have varying strength patterns. All of them are reversals but the strength and probability of the reversal are characterized by the shape of the pattern.
This distinct shape of the triple top or triple bottom pattern has a taller top or deeper bottom in the middle position. While there are not any statistics as to the accuracy of the pattern it is largely considered to be very accurate at predicting reversals.
The idea of posture comes in when comparing the neck line and shoulder line. The example shows the neck
and shoulder line roughly equal. This is a typical occurrence.
A sloping neckline can be interpreted to strengthen or weaken the signal being suggested by the pattern.
In an uptrend, an up sloping neckline can suggest a minor reversal or retracement and indicate that there is still momentum to the upside and that the pull back will be temporary.
A down sloping neckline adds weight to the predicted reversal and break o f the trend.
The Reverse Head and Shoulders has the same type of bias to its posture.
Head and shoulder patterns are revered because they are so predictable but a closer look will show why they are so accurate. A trend requires that the direction highs or lows continue to grow i.e. (higher highs and higher lows). The classic death of a trend comes when the retracements approach 100% and the tops or bottoms fail to reach new territory. Several variations can signal the death of the trend and they will have varying signs of strength.
OK, Posture… Standing straight and balanced is the classic signal. Leaning either direction
can indicate greater or lesser commitment to the change in direction. While the pattern does not give you
the BUY or SELL signal, it does give you reversal confirmation and a sense of momentum and may help you
add to or lighten a positions.
Interested in learning more? I invite you to sign up to attend one of my free trading webshops.
-- Ryan
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| Even the most experienced
investors find it hard to remove their emotions from their trading decisions. Ryan's Tactical Trading webshops can help! Find the edge that could take your trading to the next level! This week Ryan is teaching several FREE webshops. What are you waiting for? CLICK HERE to Sign Up TODAY! |
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