Encyclopedia of Chart Patterns, written by Thomas N. Bulkowski, and published in the year of 2000, is a technical analytic book depicting the patterns of the stock market.
This book, as much as it is analytical and seemingly displayed in a ‘scientific’ manner, tries to explain and loop back on the author’s own personal experiences of his trading and investing all to try to answer the question of what it means to have something work ‘almost all the time’; giving a much more unique and creative take on a subject that seems almost all technical.
In this world, we are required to take cold-hard facts, laws, and numbers into consideration when attempting to prove something other than wrong. The truth is, in contexts such as those found in nature, and scenarios in theoretical conditions, numbers depicting what has happened before are all we really got to try to explain why something is happening, or why it will happen again.
We make predictions and estimations of what happens in the future based on events that have happened in the past, or based on patterns that typically have reliable and consistent outcomes. For example, say you are a farmer starting out on some crops in France; you will have to plant the seeds, nurture them, and watch them grow. However, if a season with little rain and dry conditions makes its way to your area, you can expect that some of your crops will die off if not slow down your harvest.
Similar to this, if a stock or equity had a bad news report, you can expect it to have a bad day or two in confluence to this data. However, fundamental factors such as news, ROA’s, business models, and other company metrics, don’t always give the whole story of a stock: in relevance to Bulkowski’s story, at times his positions would turn on him or run him out. In his experiences, the only analysis he had done of these companies he traded would be that information displayed on his weekly newspaper.
So, if his stocks were running short on him so frequently and unpredictably and in contrast to his primary fundamental analysis, there had to be an underlying reason for why they were turning on him so quickly and suddenly. Now, he had to look at the one thing everything measurable has in common; the numbers. The charts.
The numbers of the stock market – whether that be the opens, closes, highs, lows, MMM’s, ranges, these and so many more – come together to what you would call stock market charts. These charts display the prices that a certain equity has traversed to within a specific time period. No matter whether these prices are displayed through candlesticks, bars, or lines, it displays information evident and sprinkled with connections.
Through more that Bulkowski read on the topic of technical analysis, - this meaning the analyzation of stocks through technical indicators, averages, and chart patterns - the more he was able to understand why his stocks shifted into directions seemingly completely disregarding its fundamental statistics and outlooks.
Primarily, he took a keen interest in technical patterns that price made in his charts (e.g., if you were depicting the prices that a stock moved to as lines, and you saw that there was a region on the graph that these lines tended to frequently reverse, that area would be a technical indicator suggesting a zone of liquidity).
The more he tested out and looked at these patterns which showed themselves to be numerous across all stocks, he saw that they do really work; not because they make cool shapes, but because these patterns showcase more complicated and hidden shifts of momentum, market sentiment, and volume differences in stock markets.
By analyzing and finding these relationships with price movements, he was able to live his life off of passive income even after being laid off from his job where he first started getting these stock newspapers even to begin with.
Today, he has a profit win/loss ratio of over 1000% and 25 years of experience with the stock market and of its technical analysis.
Making money through the stock market is a real way to live life, nevertheless make a reliable passive income. Through this type of work, you can make an order to trade before you go to sleep, and wake up with double the amount you put in there. But, at the same time, you can wake up with double the amount as a loss as well. In the end, it is your decision whether you turn the stock market into a place to gamble away your money based on ‘good feelings’, or to turn it into an actual method of income.
The stock market has changed lives, and it can change yours, too; not only financially, but truthfully, it can change the whole way you see the world. If you give it your time, maintain discipline, and offer your patience, it will give you a whole nother perspective of such common every-day ideas – these that I will not get into today because of how extensive they can turn into –.
“Don't look for the needle in the haystack. Just buy the haystack!" Jakub Tinoco Lewandowski
Interesting post! I have never really thought that much about the stock market, as it seems kind of boring, however this post explains why it is interesting if you take the time to really think about it and how it came to be. Great job!
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