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5 BEST PERFORMING TECHNICAL FORMATIONS
by Hans
Wagner
TradingOnlineMarkets.com
September 17, 2007
Using
the Formations
Certainly
there are many ways investors and traders can use technical formations.
Also investors and traders that believe in technical analysis have their
favorite chart patterns. However, it is good to know which formations
provide the best profit potential. After all trading and investing is
dealing with probabilities, so anything we can use to improve our odds
is welcome.
If I
find a chart with any of the above formations, I know there is an
increased potential for a good trade, no matter the time frame one uses.
These charts help to tell me where the best entry points are and where
to set my stops and target exit. The statistics that Bulkowski presents
help to clarify strength of the formation and refine my performance
expectations.
Probably
most important knowing that the formation is one of the best performing,
helps to formulate of how much capital investors should commit to a
specific position. After all capital management is a critical to
successful investing. Knowing that a particular formation might generate
an average rise of 52% and a likely rise of 25% allows an investor to
adjust the risk inherent in his portfolio.
Developing
your Own Discipline
Employing
the best technical formations will not automatically make you successful
as an investor. You also need to develop a trading discipline that is
based on experience with the tools that you are using. Investing in a
technical formation is an exercise in probability. Not every trade will
work out, but play enough times and the numbers will work out for you
and you will win. This is where your trading discipline comes in handy.
Identify the best opportunities, cut your losses short letting your
winners run, manage your money carefully and keep your emotions in
check. These are important part of your investing discipline.
Investors
who keep a log or diary of their trades and use technical analysis
usually track what formation was reflected in the trade. This allows
them to review their performance including how well each formation
worked and under what conditions. As a result experienced traders may
find that certain chart patterns work best for them under certain
conditions such as a strong bull market or a declining market. Knowing
which formations work for you is an important part of becoming a
successful investor and trader.
The
Bottom Line
Thomas
Bulkowski’s book provides a solid basis for investors interested in
using technical analysis to help with their investment decisions.
Knowing which the best performing formations are allows you to help
assess the risks you are assuming as well as how much capital to
allocate to the trade. Experienced investors also track their
performance so they gain further understanding of how well they are
performing. One of the items they should track is the technical
formation that existed when they made their trade. Knowing the
probability of success and potential rise for a chart pattern provides
investors additional insight before making a trading decision.
© 2007
Hans Wagner
Editorial
Archive
As
a long time investor, I was fortunate to retire at 55. I believe you can
employ simple investment principles to find and evaluate companies
before committing one's hard earned money. Recently, after my children
and their friends graduated from college, I found my self helping them
to learn about the stock market and investing in stocks. As a result I
created a website that provides a growing set of information on many
investing topics along with sample portfolios that consistently beat the
market. Feel free to visit the site at http://www.tradingonlinemarkets.com/
CONTACT
INFORMATION
Hans Wagner
tradingonlinemarkets.com
Manitou Springs, CO USA
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