Basic Technical Analysis of Financial Markets: A Modern Approach

267 Pages·2013·15.31 MB·English

by  Renato Di Lorenzo (auth.)

Perspectives in Business Culture
Renato Di Lorenzo
Basic Technical
Analysis of
Financial Markets
A Modern Approach
Perspectives in Business Culture
For further volumes:
http://www.springer.com/series/10441
Renato Di Lorenzo
Basic Technical Analysis
of Financial Markets
A Modern Approach
1 3
Renato Di Lorenzo
Genova
Italy
ISSN 2280-1464 ISSN 2280-2088 (electronic)
ISBN 978-88-470-5420-2 ISBN 978-88-470-5421-9 (eBook)
DOI 10.1007/978-88-470-5421-9
Springer Milan Heidelberg New York Dordrecht London
Library of Congress Control Number: 2013934986
Translation from the Italian language edition: La guida del Sole 24 ORE all'analisi tecnica by Renato
Di Lorenzo, © Il Sole 24 ORE 2013.
© Springer-Verlag Italia 2013
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to Annie
Preface
Those who practice correctly technical analysis—after having studied it seri-
ously and having had the patience to understand it fully—having established its
effectiveness cannot but be surprised at how many investors lose regularly on the
markets.
Usually this happens because most of them do not analyze things as they are
(i.e., as they appear from the graphs of the price and, maybe, the volumes) but as
they should be, paying attention to economists, TV commentators, magazines,
blogs, and all the folklore—often with a personal interest in what they are saying—
that revolves around this colorful world.
The classic books on Technical Analysis—on the other hand, it must be admitted—
are now hopelessly aged.
The analysis techniques have changed, people have learned, they have evolved:
what was hard to do years ago, today with the free tools available on the Internet
have become quite simple, and this has also relentlessly emphasized that a number
of classical teachings have revealed to be pure fantasy, or that they are too simple
to be really useful.
A more efficient technical analysis is needed, then, one that is not satisfied with
protocols that just seem to be fine, but which requires that they are fine, verifying
it through simulations on the PC, serious statistical counts, and so on.
Those above are the reasons for the exclusion from this book of popular chapters,
even fascinating ones, such as the Elliot Wave theory or the Gann Fans, because
those recipes are not well statistically veriafi ble.
Good reading, then, and my usual good luck!
Renato Di Lorenzo
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Acknowledgments
The author thanks Stefano Caroti Ghelli for his help. Many graphs are constructed
by use of the site www.ProRealTime.it; the author thinks it is one of the best
sites for technical analysis on the Internet. Special thanks to Gabriele Bonetti and
Marina Forlizzi.
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Warnings
The worksheets and the codes used in this book will be sent free of charge to those
who will request them from the author (e-mail: [email protected])
accompanying the request with any proof of purchase of this book.
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Disclaimer
It should be noted that markets can go up or down and, to our knowledge, there is
no perfect technique for investing and trading. So we cannot be deemed responsi-
ble for any losses arising from the advices and tools provided here.
xiii
Contents
Part I
1 Graphical Representation .................................... 3
1.1 Zig-Zag .............................................. 3
1.2 Bar Charts ............................................ 7
1.3 Candles .............................................. 9
1.4 Candlevolume ......................................... 9
1.5 Equivolume ........................................... 11
1.6 Point and Figure ........................................ 13
1.7 Kagi ................................................. 16
1.8 Renko ................................................ 18
1.9 Three Line Break ....................................... 20
1.10 Range Bars ............................................ 21
1.11 Heikin Ashi. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.12 Validation ............................................. 24
1.13 The Scales ............................................ 28
1.14 Type of Price .......................................... 30
2 Trend Analysis .............................................. 33
2.1 Linear Trends .......................................... 33
2.2 Cuts ................................................. 38
3 Targets .................................................... 43
3.1 Fibonacci Numbers ..................................... 43
3.1.1 Sam Numbers .................................... 47
4 Filtering ................................................... 51
4.1 SMA ................................................. 51
4.2 Optimization .......................................... 55
4.2.1 Buy/Sell Instructions .............................. 55
4.2.2 Date: For Example from 8.8.2010 to 8.8.2011 .......... 56
4.2.3 Initial Capital: Say 200.000 EUR or USD Depending
on the Market Traded .............................. 57
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