Alan Farley - The Master Swing ...

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ALAN S. FARLEY
THE MASTER
SWING TRADER
Tools and Techniques to
Profit from Outstanding
Short-Term Trading
Opportunities
To John Yurko
Market Wizard, Selfless Teacher, and Ancient Soul
Acknowledgments xix
Introduction xxi
PART ONE
THE GATEWAY TO SHORT-TERM TRADING
Chapter 1
Trading the Pattern Cycle 3
The Path to Trading Power 3
The Hidden Market 6
Pattern Cycles 7
Trend-Range Axis 9
Swing vs. Momentum 12
Time 14
Trend Relativity 16
Volume 18
Cross-Market Analysis 20
Reward:Risk 21
Mastering the Trade 21
Chapter 2
Preparing for the Market Day 25
The Closing Bell 25
Support-Resistance 26
Types of S/R 27
Cross-Verification 35
3D Charting 35
The Charting Landscape 38
Building the Road Map 39
Moving Average Ribbons 40
Candlesticks 43
Bollinger Bands 45
Chart Polarity 50
Bull-Bear 51
Trend-Range 51
Expansion-Contraction 53
Leading-Lagging 54
Convergence-Divergence 56
Reading Market Sentiment 58
Avoiding the Momentum Trap 59
The Big Picture 60
Dow Theory Y2K 62
Finding Winners 63
Needle in the Haystack 63
Opportunity Costs 64
Building Watch Lists 66
Writing Scans 67
Chapter 3
Analyzing the Market 69
Pattern Cycles 69
Bottoms 70
Breakouts 73
Rallies 76
Highs 79
Tops 81
Reversals 84
Declines 86
Market Mechanics 90
Pattern Characteristics 91
Understanding Price Breaks 92
Recognizing Trends 95
Trend Mirrors 97
Clear Air 99
Signposts 102
Volume and the Pattern Cycle 104
Accumulation-Distribution 105
Trends and Volume 107
Congestion and Volume 109
Intraday Trading Volume 110
Silent Alarm 111
Reading The Crowd 112
Bear Markets 112
Chapter 4
Building a Swing Trading Strategy 117
Systems and Methods 117
Momentum Trading 118
Countertrend Trading 120
Trading Tactics 124
More on Cross-Verification 126
Trader vs. the Crowd 131
Short Sales 132
Time Frame 137
Loading the Gun 139
Day Trading 142
Risk Management 143
Winning and Losing 145
Stop Losses 147
Capitalization 149
Records and Results 150
Inner Trader 151
Avoiding Self-Destruction 152
Chapter 5
Mastering the Tools 155
Patterns vs. Indicators 155
Managing Technical Tools 156
Price, Time, and Volume 160
Building Custom Indicators 162
Pattern Tools 163
Trendlines 164
Psychotic Trendlines 168
Parallel Price Channels 168
Gaps 170
Triangles 180
Flags 183
Candlestick Patterns 184
Pattern Failure 189
Indicator Tools 192
Bollinger Band Tactics 193
MACD Histogram 195
RSI and Stochastics 197
Volume Tools 199
OBV 200
Farley’s ADA (Accumulation-Distribution Accelerator) 202
Special Tools 204
Fibonacci 204
Market Numbers 212
TICK 213
Chapter 6
Understanding Time 219
The Time Element 219
The Market Clock 221
Position Timing 223
First Hour 225
Opening Imbalance 225
The Gauntlet 226
Midday Markets 229
Time for the Pros 229
Finding Midday Winners 231
Last Hour 232
Change of Character 234
Quitting Time 235
Time of Week and Month 235
Seasons and Seasonality 237
PART TWO
THE 7-BELLS: TOOLS TO LOCATE OUTSTANDING OPPORTUNITIES
Chapter 7
Mastering the Setup 243
Classic vs. Original Patterns 243
Pattern Recognition 244
Managing Opportunity 246
Two Classic Applications 248
2B Top 248
Description 249
Setup Tactics 250
Execution and Position Management 251
Reward:Risk 253
Channel Break 253
Description 253
Setup Tactics 254
Execution and Position Management 255
Reward:Risk 256
Introducing the 7-Bells 257
Original Setups and Execution 257
7-Bells Characteristics 258
Dip Trip—Price That Moves Against a Strong Trend Will Rebound Sharply 258
Coiled Spring—Constricted Price Gives Way to Directional Movement 258
Finger Finder—Candles Flag Reversals in the Next-Smaller Time Frame 258
Hole-in-the-Wall—Gap Downs after Strong Rallies Signal a Trend Change 259
Power Spike—High-Volume Events Print the Future Direction of Price 259
Bear Hug—Weak Markets Drop Quickly after Rallying into Resistance 259
3rd Watch—Breakouts through Triple Tops Signal Major Uptrends 259
Trading Strategies 260
Chapter 8
Dip Trip 261
Characteristics 261
Trade Mechanics 262
Dip Strategies 265
Applications 268
The 38-62 268
Description 268
Setup Tactics 269
Execution and Position Management 269
Reward:Risk 270
Continuation Dip 271
Description 272
Setup Tactics 272
Execution and Position Management 273
Reward:Risk 275
First Pullback 275
Description 275
Setup Tactics 276
Execution and Position Management 277
Reward:Risk 278
Chapter 9
Coiled Spring 279
Characteristics 279
Trade Mechanics 279
Spring Strategies 281
More on Range Bar Analysis 283
Applications 285
Triangle Coil 285
Description 285
Setup Tactics 286
Execution and Position Management 286
Reward:Risk 287
Failure Coil I 288
Description 288
Setup Tactics 289
Execution and Position Management 289
Reward:Risk 290
Failure Coil II 291
Description 292
Setup Tactics 292
Execution and Position Management 292
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