So what tools does the technical analyst use? The primary tool is a chart of price movement, of which there are varying types. The movement of a security's price is referred to as its price action. Price action is always the primary indicator, with volume a secondary indicator. In the analysis that is relevant to day trading, we use line charts, which display volume at the bottom of the chart. Bar charts are less useful for real-time analysis. And even less useful in intraday charts are candlesticks.

Bar Charting

Bar charts, point and figure, and candlesticks can all come in handy. Bar charts are somewhat different from linecharts. Whereas a oneminute line chart (which I call a one-minute tick chart) will place a point on the chart at the price at which the security last traded within that minute, you will have no knowledge of how the security fluctuated in price during that one-minute period. The bar chart provides that information. The top of the bar represents the high price for that period, the bottom the low price, and the dash on the right-hand side of the bar represents the close. Some charts also show a dash on the left-hand side of the bar to indicate the opening price during that period. These features of the bar chart are shown in the below figure.

When assessing general market conditions, I like to see two, and preferably three, different indicators all agree before I make my decision on where the market is heading.

We do not use indicators of overall market direction to control exactly how we behave. They merely provide a bias for our actions, pointing us toward looking for long opportunities in rising markets and shorting in falling markets. That is not to say that we will not sometimes trade against the prevailing market trend if there is an exceptionally strong movement happening in one security. It just means that we will be more careful about trading against the overall trend.

Candlesticks

Each candlestick is made up of a real body and two shadows, as shown in the below figure. The real difference between this and the regular bar on a bar chart is the information provided by the real body. In the fuigure, the upper end of the real body is marked with the letter A, and the bottom of the real body is marked with the letter B. These represent the open and closing prices for the period the candlestick spans.

If the open is higher than the close for that period, the real body will be black, indicating that prices declined in the course of the day. If the open is lower than the close for that period, the real body will be white, indicating that prices closed higher than the level at which they opened. As we shall see later, it is the combinations of candlesticks that form the useful patterns, not analysis of any single candlestick.

Point-and-figure Charting

The point-and-figure method is a little more difficult to understand, at least initially. Point and figure is a really good method when looking for stocks that may break out, either to the upside or the downside. I have heard of people using intraday point and figure, but I have not done so. Point-and-figure charts will be discussed when we are assessing overall market direction, to give us a bias for the direction in which we will look to trade securities. Again, just as with candlesticks, the point-and-figure information only gives us a bias. Should the price action for a given day contradict the point-and-figure information, we go with that instead. Day traders should always use the day's price action as the primary driver for trading decisions. Should the day's price action disagree with the point-and-figure indicator, the day's price action takes precedence. The basic point-and-figure chart is shown in the below figure.

This is an odd display, no question. It represents price movement only, disregarding both the time element and volume. The vertical axis represents price, and the horizontal axis has no assignment. The concept behind the point-and-figure method is that a column of X's represents a rising trend, and a column of 0's a falling trend. As such, the point-and-figure chart highlights trend reversals and price breakouts very well, in fact, far better than a line or bar chart.

In point-and-figure charting the box size is of paramount importance. In the figure, the box size is one dollar, and we can see the first column is one of X's, indicating that the price moved from 110 to 113 without any fallback. This could have happened over minutes, weeks, or months, because time does not matter in point-and-figure charting. The next feature to note is what degree of retrenchment will cause the chart to reverse into a column of 0's. That is selected, but for argument's sake, let us make it 3, which means a reversal of three box sizes is needed to shift the chart display to the next column on the right.

To make this clearer, let's us look at some data that could be used to generate the display. These figures represent the closing price taken at regular intervals. They could be at the end of the day, a week, every hour, or even every 15 minutes. The rate at which data is collected is the only area where time has an effect on the point-and-figure chart. The first set of data is as follows: 110, 113, 109, 112, 109, 113 Here, a three-point reversal happens after each consecutive data point, which causes a new column to be created. The same display would be generated with the following data. 110, 111, 112, 113, 110, 109, 112, 112, 111, 109, 112, 113 This shows the runup from 110 to 113, which is immediately followed by a three-point reversal to 110, then a further decline to 109. The reversal happens again at 112 and holds there as the price falls to 111. The reversal does not happen until the fall to 109. The final reversal happens with the move to 112, followed by 113.

I have not come across a good source for intraday point and figure, although I would dearly like to, so I cannot use it for timing day trades. However, point-and-figure charting becomes important when it comes to assessing the overall market and sector health of securities.

The concepts of support and resistance are essential when selecting entry and exit points for trading a trend. These are not esoteric theoretical concepts for notions based in voodoo or some other mystical realm. They are reflections of the repetitive nature of market participation. First of all, let us talk about a resistance level in an uptrend, as illustrated in the below figure.

At point A, traders operating without knowledge of when best to enter a trend buy in. Instead of receiving a price appreciation, however, they see the price fall after their purchase. Feeling sore, they look for an exit that limits the damage to their capital. That point comes at B, when they can get out even, which most people will settle for when they have a negative perception of the position they hold. This then causes a wave of selling when those that purchased at point A decide to get out. This cycle can go on and on. If there are sellers at the resistance level, it probably means that there were members of the public buying at that level and the cycle can repeat.

The obvious question is why the buyers at point A did not cause a further price appreciation? The reason is that trends always move in a zig-zag formation, and there were more eager sellers than willing buyers in the public at that time. As a technical analyst, you don't care why this happens, you merely note the effect and try to profit from it. Support occurs when the price action takes a security down to a level where there are willing buyers in the public. This can happen for various reasons. Buyers may come in to cover short positions that did not work out as intended and seek to get out even, just as long holders did in the uptrend discussed previously. It can also be that for whatever reason, the stock is perceived as cheap once it has reached that level. Again, there can be many reasons, and we are only interested in trading the effect, as and when it happens.

Another important effect to be aware of is that support becomes resistance if that support level is broken. Consider the below figure.

In this figure, we see the usual downward zig-zag formation of an established downtrend. At point A, we can imagine some traders thinking that the security has gone as low as it should and that the trend is reversing (these are clearly not disciplined technical analysts), and they buy the security. The security rallies briefly, but the strength of the trend carries it lower and these traders find themselves in a losing position. When the security rallies briefly, the traders look to get out even, so as soon as the price reaches their initial entry point, they exit in a wave of selling, pushing the security down further.

Support and resistance levels can arise from many other causes. The trendline itself is important as a support or resistance indicator. The greater the number of times the price action has bounced off a trendline, the more significant a break of that trendline becomes. What this means in terms of concrete action taken by day traders is that if you have a position in a security that has seen more than six bounces off a defined trendline, any break of that trendline should immediately trigger liquidation of that position. The breach of a long-established trendline tends to be followed by a rapid move in the opposite direction of the recent trend. In addition, round numbers can become significant levels in a stock's price action. Under certain market conditions, the fact that there are lots of bids at a certain level can create support; conversely, a lot of stock offered at a certain ask price can create resistance. This is by no means the whole story, as we will see in Chapter 4. Round numbers as support or resistance certainly ranks as a secondary effect. Day traders should be aware of it, but not driven to action by it.

These levels of support or resistance are used to time entry and exit points in trends. We have already discussed the correct place to enter a trend: on a pullback to resistance. Should the expected bounce in the price action not take place immediately, however, at what stage should traders close their losses? That question has no definitive answer; it depends on many factors at the time of the trade. The main concern is that we believe the trend to have been broken by the unexpected move. When we are convinced of the break, the time is right to cut our losses. When entering the trade, it is wise to have a level in mind that will trigger you to cut your losses. If that number is reached, you will invariably do best by exiting immediately.

When we are in a trend and see it weakening, there is also a decision to make as to when to lock in profits. During Phase 1 trading, if I have a long position, I usually exit a position at the first sign of a slowdown in the buying of that security. During Phase 2 trading, however, if I have correctly bought into a trend and see immediate price appreciation, I allow the trend to mature and test the trendline on pullbacks in anticipation of further gains. In general, I do not let the price drop more than a 1/4 past where I perceive the trendline to be without closing my position in these circumstances.

The very first trade is an intraday pattern of a 5 minute bar chart that is called „dip and rally“ setup for a buy breakout.

The consolidation at the high of the day is considered to be the key to the success of this setup. This is also true for other pattern variations. This is very good if the consolidation is very long and tight. This is a setup that can be developed all trrading day long.

There is also another pattern, that is more obvious. It looks like this:

Another intraday consolidation pattern that you can see on the below illustration looks a little different. It can be a powerful setup:

In the setup #3 depicted above, an active stock can show a tremendously illiquid intraday bar chart. The most important for this chart pattern is to make sure the stock averages good volume on a daily-basis (for example, 100k shares +), and that the daily bar chart shows good space tor movement to the upside with nearby price resistance. You can also keep tabs on its volume in the market maker screen.

The next chart is another well known example that leads to consolidation and a wonderful breakout trade:

Early morning consolidation (similar to pattern #2) can be an important part of entering trades at the start of the trading day (remember though that it is best to wait about 10 minutes before you enter a trade). This way you can catch the first and best breakout. If you are following a particular stock with the expectation of a good move on the day (or simply stumble across one with the following pattern), it may be considered a strong trade candidate. This is especially true if your market maker screen is moving and showing momentum coming into the breakout. The pattern consists of just a few bars on the morning and a range of only a 1/8 to 1/4.

The point in this pattern is to catch the earliest breakout and the best price. Of it was not possible, then pass up the trade. You should never chase a stock.

Once a breakout takes place, the stock normally spikes out of the consolidation to begin a strong move. If you miss the initial breakout, other consolidation opportunities may setup in the stock as the day progresses. For example:

There is no doubt the first breakout is the best one to take. The question arises though, whether you should take the second, third, fourth, etc… breakout. If you missed the earlier breakout(s), how do you know whether or not to take the next one? The best way is to know how long the overall market has been moving in a direction, and if it is losing steam. Also, consider the average daily range of the stock as welt as the strength (momentum) coming into the breakout. If the stock often trades a two to three point daily range, then the subsequent breakouts may still have scalping potential if the range on the day is, for example, only 1 and 1 /8 points at that time. Simple looking at the daily historical chart will show whether the price is breaking out of a daily consolidation area and if daily support or resistance has been broken. This can often lead to a large magnitude move and a stronger initial price Spike, even if the last few daily bars have been in a narrow price range. Again, the longer the consolidation on the 5 minute bar chart, the better the trade.

Trade setup #7 depicts two good trade entry points following extended consolidation. Consider both of them. The second breakout to the downside could also be traded.

„Wedging“ consolidation on the 5 minute chart, especially if it develops over the first 1 to 2 hours of trading, can precipitate strong breakout moves. This pattern usually sets up for a trade on the long side Consolidation at the high of the day must be present and hugging the upper price boundary as the wedge pattern unfolds. Here is the buy setup:

When you choose to participate in FOREX trading you should pick the three most important currency pairs and you should wait to pick any of the eight widow time trade. The time zone will automatically be adjusted to your time zone. The FOREX trading pairs are actually one of the great pairs someone would be able to pick and it’s quite easy way of gaining money though it starts from an investment of at least 100 Euros.

If you are a beginner on the FOREX trade market than you probably would need the help of Gann trading software and if you decided to use the Gann trading software it will provide you with special techniques that are able to help you. The Gann’s Master Time Factor software is Bill McLaren's favorite software pack. Bill McLaren is the most important person using Gann worldwide that has appeared on CNBC. McLaren has contributed to the design of this soft. Everything that one must learn so he can be able to use the techniques is shown in the program.

There are important courses that will learn the students whether the cycle is on a high or on a low more in advance. It uses the Gann trader and it makes you understand that every market has a unique cycle of highs and lows. Anyway all the movements of a market have some basic concepts in their own structure.

This is followed by the description of software that looks appealing in the eyes of the one that actually uses the astrology trading and the Gann’s astrolo­gical method in order to obtain great forecasting of the movements of the market. However not only that the traders are used on the market but actually the Gann forecasting is also used in the sites that offer free or paid predictions in order to entertain the public and obtain the forecasting that their clients are looking for.

Anyway the Gann forecasting comes with an appealing forecast and it’s based on the idea that the merchant from the sixteenth century said that the future actions will be a repetition of the past actions which however is true because of the rationally thinking that one action leads to another. There is an interesting link it could be made of the astrology trading and economical technical analysis tools that are helping investors to know how and where to place their investments.

The Gann square of nine is an instrument composed by a spiral with numbers which tend to grow up by any Gann square. The numbers on the Gann square are put in increasing order and they go from left to right in a spiral movement opposite to the clock movement.

The Gann square of 9 calculator is an instrument predicting with big accuracy the levels and the resistance levels of the prices in time like days, weeks, and month or even a year. This procedure is based on two analyses that Gann has made for getting accurate results forecasting the evolution of prices and of the market and the indicators of the prices. There are some legends saying that this knowledge was obtain in his visit to Egypt where he obtained the knowledge of using the square properties in order to find what was important for him as a merchant. The square of nine uses squares that are divided by units. In the center of the spiral there is the number one. The counting continues to the left adding number two and goes up with three then turns right with number four and goes on with this rule of the spiral.

The topic of this article is the Gann square of nine. So it will probably be interesting to find out how this square of 9 was invented by Gann. Perhaps you did not know that the Gann squares are composed by the structure of the Egyptian pyramids.

It is now an instrument that helps conduct a technical analysis using the Gann square of nine charts, which provides the trader with an important hints to be used during market analysis. This is a great support in the process of trading the merchandise which helps the merchants take the best decisions in order not to lose their original investment or the profit that was reinvested.

The history of Gann Square of 9 going back to ancient pyramids might be a legend or not. No matter if true or not, these instrument stll helps forecasting the resistance levels and also forecasting the resistance support. Think of what the ones who know how to use these techniques should make the difference between the square that analyses the price which predicts the evolution of the price support and the square that analyses the time which predicts the evolution of the market reversals or predicts the days, or the time when the market is reactionary and it is not a wise decision to come up with massive trading.

What is Gann fan? Gann fan is a market prediction and analysis tool designed by the person with same name who believed that he can use mathematical and geometry to predict the action and evolution of the prices. For this tool to be precise you have to draw a table so that the time and the price have same dimensions and you can measure precisely the evolution of the prices everywhere in the table. The ideal situation is when prices increase or decrease at a forty-five degree. Gann fan is made by a structure of nine angles that are used to measure the price action.

There is a Gann fan technical analysis tool that helps people to analyze how the market is at the moment and some values indicates how a market can be good or bad depending on the values that are given. The Gann fans are the tools that are used on a price analysis. How to use Gann fan is pretty simple because all you have to do is to use the software that includes Gann fan tool among other technical analysis instruments and follow simple instructions.

So as you can see it is not so difficult to use this instruments and it even can be useful because it indicates you the market tendencies. The Gann Fan chart is actually composed from many Gann fan lines that can have their properties changed using the option from the software. Even though the Gann technical analysis was invented long time ago it is still used to forecast the market evolution using price charts. When analyzing a Gann chart it is advisable to set your analysis tool at a range of twenty-five percent, fifty-five percent or seventy-five percent of the target prices so the level results are accurate.

To sum up, it should be said that this tool is not modern but it is an important market analyzing tool? that has proved its efficiency during a long time and it is still used nowadays by those who analyze the evolution of the market or trading. It is simple and fast to use and it is not difficult to use or understand by anyone whether you have or not economic background. If you have a business and want to take out the best of your actions than all you have to do is download a Gann fan tool and read just a few pages about how to use this instrument.