High-Probability Trade Setups: A Chartists Guide to Real-Time Trading (Wiley Trading)
A comprehensive volume of today’s most profitable trade set-upsA key element of trading is identifying situations in the financial markets that can produce a profitable trade. Fundamental analysts search for situations where a stock is undervalued or if a stock’s prospective earnings growth is underestimated by a majority of investors. Technical analysts look at patterns in the market that historically indicate the direction of the markets next move. High Probability Trade Set-Ups catalogs the b
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A Review of High-Probability Trade Setups: A Chartist’s Guide to Real-Time Trading,
Author, Tim Knight, explains that, “The goal of this book has been to study a variety of common chart patterns,” (p. 337) which is achieved through a systematic review each one. The book is also comprised of important, secondary material: an introduction to technical principles; a brief trading autobiography; stop-loss and trading rule suggestions; musings on being a bear, and other insights. Let me first comment on the secondary material.
The short introduction is excellent for a novice. The writing explains, with simplicity, clarity, and precision–not too surprising, coming from an author of twenty books–the basic principles of technical analysis. I would probably have taken this introduction for granted if not for a personal experience. This summer, I gave student from Rollins College a crash course in finance, covering both technicals and fundamentals. His reading list included several chapters from an introductory and comprehensive book on technical analysis. He once mentioned, “After having gone through half the book, once I finally induced what the author meant by bullish and bearish, it became a lot easier to understand.” Keep in mind, this student was particularly bright and had a near 4.0 GPA. Arduous hours of confusion could have been avoided if the book’s introduction were to have explained the two terms we all take for granted. Had “High-Probability Trade Setups” been published in June of this year, it would have been my first choice for poor Sam.
Moving on to the autobiographical section, Tim Knight writes, “Every trader has a story, and I think it’s helpful to understand a particular trader’s narrative to better grasp what they have to say about the markets.” (p. 15) Although both claims made in the sentence are true, the author humbly fails to acknowledge that his trading story is particularly interesting. It includes his perspectives on the internet boom, the dot-com crash, the housing bubble and great recession; it also includes personal tales, such as how the founding of his business, Prophet, was aided by a fortuitous encounter with Andy Bechtolsheim, cofounder of Sun Microsystems, a year prior.
All the sections, although seemingly disparate, are related. An entire chapter is dedicated to setting stop orders, a critical practice. Many of the patterns covered earlier serve as examples and guidelines for setting stops. In that chapter, the reader will encounter this valuable advice, “The price you choose for your stop-loss should be based on this one question: At which price is my basis for holding on to this position violated?” (p. 320) One of the best, money saving insights provided–also integrating the sections– regards trading incomplete chart patterns with the anticipation that they will materialize: “You will find that jumping the gun like this will backfire so many times that it simply doesn’t become worth the extra profit you might make.” (p. 341)
As to the chapter, “A Guide to Real Life Trading,” suffice it to say that any trader, with any level of experience, benefits from reading and rereading trading rules! Another noteworthy insight is provided earlier in the work, “You will never get rich being a bear.” (p. 7). It is common knowledge, and easily discernable, that the maximum profit on a short sale is 100%, and that the profit on a long can be several hundred or even thousand percent. However, the comment–perhaps due to its phrasing and coming from a bearishly inclined individual– resonates against the proverbial big picture, and can perhaps influence one’s general trading philosophy.
The Main Topic and How Its Coverage Compares with Other Books
In the Patterns section of the book, one chapter is dedicated to each pattern, for example, cup with handle, diamonds, flags, head and shoulders, etc. The structure remains the same for each chapter, which is comprised of four subsections: Definition of the Pattern; Psychology behind the Pattern; Examples; Summary. This systematic treatment makes the book easier to read, comprehend, and return to for reference.
I am aware of four popular comprehensive books on technical analysis. Three that I have read are “Technical Analysis of Stock Trends” by Edwards & Magee, “Technical Analysis” by Kirkpatrick & Dahlquist, and “Technical Analysis Explained” by Pring. Tim Knight’s book focuses on one topic, chart patterns; however, all the books mentioned have sections dedicated to them. So, allow me to propose and then answer a consumer question: “Why should I buy Tim Knight’s book if I can get the same information from books that also cover additional topics?”
To answer that question, I have created a table comparing these books’ treatment of chart patterns based on five criteria. The ratings are as follows:
0. The book does not make note of this criterion
1. The book covers the criterion well
2. The book covers the criterion very…
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|Trade Setups by Tim Knight,
This is an excelent book for the non-professional. It is very helpful and a very easy read. I gained a much better knowledge of trading stocks with this book.
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|Pure Pattern Analysis,
This book presents the popular patterns with tons of chart examples to support the explanation. Furthermore the author illustrates the psychology of investors going through each phase of the pattern formation. The book is a bible of patterns pure and simple and would be an excellent addition to both beginner and experienced traders. After reading this book you should become better in spotting formations and more confident in trading them. I would also strongly recommend to use the software mentioned in the book “Prophet Charts” and to follow Tim’s website at ([…]) where he posts priceless thoughts & recommendations on the current day to day market activity.
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