"Technical Analysis: The Complete Course" by Jack Schwager. Jack Schwager "Technical Analysis. Full course Personal life of Jack Schwager

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Jack D. Schwager
Technical Analysis: Complete Course

Translation from English A. Kunitsyn - Ch. 1–12, 14; B. Zuev - ch. 13, 15–24

Editor A. Dzyura

Technical editor N. Lisitsyna

Corrector E. Chudinova

Layout designers A. Fominov, K. Lun

All rights reserved. The work is intended exclusively for private use. No part of the electronic copy of this book may be reproduced in any form or by any means, including posting on the Internet or corporate networks, for public or collective use without the written permission of the copyright owner. For violation of copyright, the law provides for payment of compensation to the copyright holder in the amount of up to 5 million rubles (Article 49 of the Code of Administrative Offenses), as well as criminal liability in the form of imprisonment for up to 6 years (Article 146 of the Criminal Code of the Russian Federation).

* * *

With love - to my son Zakhar, whose affection touches me, his creative abilities impress me, and his sense of humor delights me

Problems arise to make us grow.

If there were no problems in life, we would all become mediocre.

Wally ("Famous") Amos

Preface

Despite the claims of countless books, advertisements and brochures, stock trading success cannot be contained in any indicator, formula or system. This book is written by a trader, from a trader's point of view, and is not a collection of analytical techniques, indicators or systems using idealized illustrations, but a manual based on real practice.

In explaining a variety of analytical techniques and methods, I have tried to keep at the forefront key issues that are often ignored by authors of books on technical analysis. How to apply the described methods in real trading? What is suitable and what is not suitable for working in the market? What signs indicate the unsuitability of the method? How to Design and Test a Trading System to Maximize It future, but not retrospective effectiveness?

Jack D. Schwager

New York, October 1995

Words of gratitude

In my early years in the futures markets, I was a pure "fundamentalist" and had complete disdain for technical analysis - an opinion, I must say, based more on prejudice than on knowledge or experience. At the time, I was the director of research at a large brokerage firm. There was a technical analyst in my department, and I began to notice something strange: he was often correct in his judgments about market behavior. We became good friends and he taught me the basics of graphical analysis. As I gained experience in using technical analysis, my attitude towards it changed to the diametrically opposite. The technical analyst who first introduced me to the methodology and had such a big impact on my career is Steve Kronowitz. Without Steve, this book would probably never have happened.

Over the past seven years I have worked very closely with Louis Lucac, my partner in a futures trading advisory firm. Louis is not only an excellent programmer, he also has outstanding knowledge of building and testing systems. Louis wrote programs for many of the systems I had developed over the years and worked with me to combine these systems into a highly sophisticated computerized trading methodology. If it weren't for Louis, I would never have been able to see my ideas work (and make money) in the real world.

There were several subject areas that I wanted to include in this book, but in which I felt I lacked experience. Therefore, I selected and invited several co-authors to write these chapters. Here are my co-authors and the topics they devoted their work to: Thomas Birowitz wrote about oscillators, Richard Mogi wrote about cyclical analysis, and Steve Nison wrote about Japanese candlestick charts. Everything that came before was important, but most of all I am grateful to my wife, Jo Ann. Jo Ann understood my desire, perhaps even my inner necessity, to write the series of books of which this volume is a part—to commit to paper what was inside me. I thank her for supporting me in working on this project, despite her full awareness that this effort significantly impinges on our time together and on our family structure. And following this, I thank my children Daniel, Zakhar and Samantha for the way they reacted to the reduction of my presence in their lives.

Unless otherwise noted, charts in this book are reproduced with the kind permission of Prudential Securities Inc.

Jack D. Schwager

Part I
Graph Analysis

1. Graphs: forecasting tool or folk art?

Common sense is not inherent to everyone.

Voltaire

There is a parable about a stock exchange gambler whose passionate desire to win was only spurred on by another loss. In the beginning, he tried to base his trading decisions on fundamental analysis. He built complex models that predicted stock prices based on detailed supply and demand statistics. However, these forecasts were invariably overturned by some unforeseen event, be it a drought or an unexpected export deal.

Finally, infuriated, he abandoned the fundamental approach and turned to graphical analysis. He carefully monitored price charts, looking for repeating patterns that would reveal the secrets to successful stock trading. He was the first to discover such unusual formations as “shark’s teeth” daytime lows and “Himalayan peak” highs. But alas, the models always seemed reliable only until the moment he began to base his transactions on them. When he went short, the highs turned out to be just pauses in the growing bull market. In an equally ruinous way, after each of his purchases, the steady trend of rising prices suddenly reversed.

“The problem,” he mused, “is that graphical analysis is too crude. I need a computerized trading system." So he started testing different schemes to see if any of them would have been profitable as a trading system in the past. After exhaustive research, he discovered that buying soybeans, cocoa, and Eurodollars on the first Tuesday of odd-numbered months and then closing those positions on the third Thursday of that month produced significant profits over the past five years. Incredibly, this extensively studied pattern stopped working after he started trading. Another bad luck.

The stock trader tried many other methods (Elliott waves, Fibonacci numbers, Gann squares, Moon phases), but they all turned out to be equally ineffective. Just then he heard about a famous guru who lived on a distant mountain in the Himalayas and answered the questions of all pilgrims who managed to find him. The trader boarded a plane to Nepal, hired guides and set off on a two-month journey. Finally, at the end of his strength, he reached the famous guru.

“Oh, wisest one,” he said, “I am a desperate man. For many years I searched for the key to successful stock trading, but everything I tried was in vain. What's the secret?"

The Guru thought only for a moment and, looking intently at the visitor, replied: “PODEPRODO.” He didn't say anything else.

“SUDEPRODO?” – the trader did not understand the answer. This word haunted him every free minute, but he still could not comprehend its meaning. The stockbroker told this story to many people, until finally one of the listeners deciphered the guru's answer.

“It's quite simple,” he said. “Buy low, sell high.”

The guru's message may well disappoint readers looking for insightful keys to stock market wisdom. PODEPRODO does not correspond to our concept of insight, since it naturally follows from common sense. However, if, as Voltaire suggested, “common sense is not inherent in everyone,” then this message is not obvious. Consider, for example, the following question: “What are the recommendations for traders when the market is making new highs?” PODEPRODO's "common sense" theory would clearly indicate that subsequent trading activity should be limited to taking a short position.

It is very likely that a significant part of exchange players would be satisfied with such an interpretation. The appeal of the PODEPRODO approach may be due to the desire of most traders to demonstrate their skills. After all, any fool can buy the market after a long rise in prices, but it takes a genius to catch the fading of this trend and sell to the maximum. In any case, few trading strategies are as close to “everyday” intuition as the tendency to buy when prices are low and sell when prices are high.

As a result, many stock market players have a strong tendency to go short when the market enters a new, higher price range. There's only one problem with this approach: it doesn't work. A plausible explanation is always at hand. The market's ability to reach and consolidate at new highs usually indicates strong supporting forces that often push prices too high. Common sense? Certainly. Note, however, that the implications for trading are diametrically opposed to those that follow from DEPRODO's "common sense" approach.

The fact is that our “everyday” intuition and common sense regarding market behavior are often erroneous. Graphical analysis allows you to apply common sense to stock trading - a goal that is much more elusive than it seems. For example, if one were to thoroughly study historical price charts to determine the consequences of the market reaching new heights before engaging in trading, one would be much more likely to avoid falling into one of the typical pitfalls that beset novice traders. By carefully studying historical price patterns, other market truths can be learned.

It must be recognized, however, that the usefulness of charts as an indicator future the direction of prices is fiercely contested. Rather than listing all the pros and cons of this debate, we note that a recent episode of a popular television program about financial markets succinctly highlighted some of the key issues in this debate. Below is a recording of this program:

LEADING Hello! I'm Louis Panizer from the weekly Wallet Street. Today we'll take a break from our usual interview format to open up the debate about the usefulness of commodity price charts. Can all those jumping lines and shapes really predict the future? Or is Shakespeare's description of life equally applicable to graphic analysis: "An idiot's tale, full of sound and fury, but without any meaning"? Our guests today are Vera N. Tendency, a renowned technical analyst with the Wall Street firm of Charnum and Barnum, and Lubomir A. Moneta, a professor at Ivory Tower University and author of The Only Way to Beat the Market is to Become a Broker. Mr. Coin, you belong to a group of experts called the Random Walkers. Is it some kind of club of travelers who determine their destination by throwing darts at the road map? (Laughs smugly into the camera.)

PROFESSOR COIN No, Mr. Panizer. The Random Travelers are a group of economists who believe that market price movements are random. That is, it is impossible to develop a system for predicting market prices, just as it is impossible to develop a system for predicting the colors that appear sequentially when playing roulette. Both are purely a matter of chance. Prices have no memory: what happened yesterday has nothing to do with what happens tomorrow. In other words, graphs can only tell you what happened in the past; they are helpless in predicting the future.

MISS TREND Professor, you are missing one very important fact: daily prices are not drawn from a lottery drum, but rather are the result of the collective actions of all market participants. Human behavior may not be as predictable as the movement of planets, governed by physical laws, but it is not completely spontaneous. If this is not so, then your profession - economics - is doomed to the same fate as alchemy. (At these words, Professor Moneta fidgeted in his chair.) Graphs reveal basic patterns of behavior. As long as similar interactions between buyers and sellers result in similar pricing patterns, past experience can indeed be used as an indicator of the future.

PROFESSOR COIN If past prices can be used to predict future prices, then why have countless academic studies concluded that the technical models tested failed to outperform a simple buy-and-hold scheme when factoring in brokerage commissions?

MISS TREND The techniques tested in such studies are usually too simplistic. Research shows only that these specific schemes do not work. But they do not prove that a broader synthesis of price information, such as graphical analysis or a more complex technical system, cannot be successfully used in making trading decisions.

PROFESSOR COIN Then why are there no studies that convincingly demonstrate the effectiveness of graphical analysis as a forecasting tool?

MISS TREND Your argument merely reflects the difficulties of quantifying graphical theories, not the shortcomings of the graphical method itself. What one person considers to be an image of a top, another appears to be an area of consolidation. Trying to mathematically describe any graphical model except the simplest will inevitably lead to controversial results. The problem becomes even more confusing when one realizes that, at any given time, a graph pattern may express contradictory patterns. Thus, in a sense, it is truly impossible to objectively test many graphics theories.

PROFESSOR COIN Which is pretty convenient for you, isn't it? If these theories cannot be comprehensively tested, what good are they? How do you know that trading based on charts will lead to a better result than just 50/50 (without taking into account commissions, of course)?

MISS TREND If you mean that blindly following every chart signal will only make your broker rich, then I don't argue. However, my point is that graphical analysis is an art, not a science. Familiarity with basic graphic theories is just a starting point. The true usefulness of charting depends on the trader's ability to successfully synthesize standard concepts and his own experience. In the right hands, charts can be extremely valuable in predicting significant market trends. There are many successful traders who make their decisions primarily using charts. How would you attribute their success to a lucky streak?

PROFESSOR COIN Yes. That's right - a streak of luck. Given enough traders, some will win no matter how they make their decisions - by studying charts or throwing darts at a stock quotes page. This is not a method, but just a law of probability. Even in a casino, a certain percentage of players still win. You won’t say that they owe their success to some insight or system.

MISS TREND This only proves that the higher results of some adherents of graphical analysis could be achieved through chance. This does not disprove the claim that an experienced graphic artist knows something that gives him an advantage.

LEADING I feel a lot of resistance here and I think it would do well for us to rely on some kind of support. Gentlemen, do you have evidence to support the correctness of your positions?

PROFESSOR COIN Yes! (At the same time, Professor Moneta pulls out a plump manuscript from his briefcase and thrusts it into the hands of Mr. Panizer. The presenter quickly glances through individual pages and shakes his head, noticing the abundance of funny Greek letters.)

LEADING I meant something less mathematical. Even educational television is not yet ready for this.

PROFESSOR COIN Well, I have one more thing. (He produces a piece of paper and hands it to Miss Tendency.) How would you interpret this graph, Miss Tendency? (He tries unsuccessfully to hide his smug smile.)

MISS TREND I would say it looks like a graph based on a series of coin tosses. Well, you know: heads - one square up, tails - one square down.

PROFESSOR COIN(Whose grin turned into a very obvious grimace.) How did you know?

MISS TREND Lucky guess.

PROFESSOR COIN Still, it doesn't undermine my argument. Look at this chart. There is a trend here. And here - your colleagues seem to call this the “head and shoulders” model?

LEADING By the way, since we are talking about heads and shoulders, would each of you comment on the situation with Procter & Gamble shares?

PROFESSOR COIN(Continues) The same graphical patterns that you discover so quickly in price charts also appear in apparently random series.

MISS TREND Yes, but such a chain of arguments can lead to somewhat strange conclusions. For example, would you agree that the fact that working economists have advanced degrees is not a random event?

PROFESSOR COIN Certainly.

MISS TREND Okay, a random sample of the population will probably also include some people with advanced degrees. Would you conclude from this that having a degree in economics is a coincidence?

PROFESSOR COIN I still don't see any difference between the price charts and my random events chart.

MISS TREND You do not see? Does this look like a graph of random events? (Miss Trend shows a chart of silver prices, July 1980 futures (Figure 1.1).)

PROFESSOR COIN Well, not exactly, but...

MISS TREND(Goes on the attack.) Or this. (Shows a chart of December 1994 coffee contracts (Figure 1.2).) I could go on.

LEADING(To Professor Moneta.) Miss Trend seems to be really coming. Is there any reason to reject her examples?

PROFESSOR COIN Well, I admit that these examples are quite extreme, but they do not yet prove that past prices can predict future prices.

LEADING Before our time reaches the “upper limit”, so to speak, I would like to change the route a little. I'm interested to know your opinion about fundamental analysts?

PROFESSOR COIN They are better than graphic artists because they can at least explain price movement. But I'm afraid that their attempts predict the prices are just as futile. You see, at any given time, the market already takes into account all known information, so there is no way for them to predict prices, unless they have the gift of anticipating unpredictable future events such as droughts or export embargoes.

MISS TREND First of all, I would like to address the implication that chart analysts are ignoring fundamental data. In fact, we believe that the price chart provides an unambiguous and immediate reflection of the net impact of all fundamental and psychological factors. In contrast, accurate fundamental models, if they could be constructed at all, would be overly complex. Moreover, fundamental data for the forecast period would inevitably be estimates, which makes price projections extremely sensitive to error.

LEADING Therefore, you both agree with the statement that the fundamentalists will soon be standing on the porch with their hand outstretched.

MISS TREND Yes.

PROFESSOR COIN Yes.

LEADING Great, with this surge of agreement we will end today’s program.

In a sense, the dispute between the "Wanderers at Random" and the graphists can never be resolved. You need to understand that it is impossible to prove an accident; all that can be proven is that this graphical model does not exist. Because there is no consensus on the precise mathematical definition of many chart patterns, their viability as price indicators can neither be proven nor disproved.

For example, if one wanted to test the view that breakouts from trading ranges represent real stock signals, one would first need to formulate a precise definition of a trading range and breakout. Suppose the following definitions are accepted: (1) trading range is a price band that includes all daily price changes over the past six weeks and is no wider than 5% of the average price for that period 1
Determining the maximum price width serves to eliminate periods of significant price fluctuations when considering trading ranges.

; and 2) breakdown is the closing price above the upper limit of the six-week trading range. Although the usefulness of breakouts as trading signals can be verified based on these definitions, these definitions themselves will be disputed by many. Here are some possible objections.

1 . The price band is too narrow.

2 . The price band is too wide.

3 . The six week period is too long.

4 . The six week period is too short.

5 . No adjustment is made for individual days whose prices fall outside the range - a case that, in the opinion of most chartists, does not violate the basic scheme.

6 . It does not take into account the direction of the trend prior to the trading range, a factor that many chartists view as critical in interpreting the reliability of a breakout.

8 . A breakout can only be qualified if there are several closes above the trading range.

9 . A time lag should be used to test the authenticity of the breakout: for example, will prices still be outside the trading range a week after initially breaking out of it?

This list is only a partial enumeration of possible objections to our hypothetical definitions of a trading range and breakout, all for one of the simplest charting models. Imagine the ambiguity and complexity that will arise when trying to accurately define more complex patterns such as confirmed head and shoulders.

For their part, the graphic artists also cannot win this dispute. Although graphical analysis is based on general principles, its application is subject to individual interpretation. A successful chart trader may have no doubts about the validity of chart analysis, but random theorists would debunk his success as a simple consequence of the laws of probability, since even with a series of completely random trades, a trader, according to probability theory, may for some time be in the black. In short, the debate is far from over.

It is also important to understand that even if reliable testing were possible, the conflicting conclusions of the Random Wanderers and the Graphists would not necessarily contradict each other. One way of looking at the situation is that markets can witness long periods of random fluctuations interspersed with shorter periods of non-random behavior. Thus, even if price series as a whole appear arbitrary, it is quite possible that within a given interval there are periods that exhibit certain patterns. The goal of a chart analyst is to identify these periods (i.e., large trends).

It's time to acknowledge my own biases. Personal experience has convinced me that charts are a valuable, if not vital, stock trading tool. However, such representations do not prove anything. "Wanderers at Random" would argue that my conclusions may be based on the selective property of memory, i.e., the tendency to remember the successes of graphical analysis and forget the failures, or, in general, on simple luck. And they are right. Such explanations are really can be correct.

The fundamental thing is that each trader must evaluate the graphical material independently and draw his own conclusions. However, it should be emphasized that many successful traders consider charts to be an extremely valuable stock trading tool, and therefore the novice trader needs to be careful not to dismiss this approach simply out of intuitive skepticism. Some of the main potential benefits of using charts are listed below. Note that a number of these applications remain valid even when one completely rejects the use of charts for price forecasting purposes.

1 . Charts provide a condensed history of prices—an essential piece of information for any trader.

2 . Charts can give a trader a good sense of market volatility - an important consideration in assessing risk.

3 . Charts are a very useful tool for a fundamental analyst. Long-term price charts allow fundamentalists to quickly identify periods of major price swings. By identifying the underlying conditions or events of these periods, a fundamentalist can identify the key factors influencing prices. This information can then be used to build a model of price behavior.

4 . Charts can be used to determine when to open and close positions, even by traders who make decisions based on other information (for example, fundamental).

5 . Charts can be used as a money management tool to help set thoughtful and realistic protective stops.

6 . Charts reflect market behavior based on certain repeating patterns. With enough experience, some traders will discover the ability to successfully use charts as a method of anticipating price movements.

7 . Understanding charting concepts is probably one of the most important prerequisites for creating profitable technical trading systems.

8 . Skeptics take note: under certain circumstances, taking an approach contrary to that dictated by classic chart signals can lead to very profitable trading opportunities. The specifics of this method are described in detail in Chap. eleven.

In short, charts can be useful for everyone, from skeptics to believers. The chapters in this section introduce and evaluate the key concepts of classical charting theory and address the critical issue of using charts as an effective stock trading tool.

Today in the article we will talk about Jack Schwager. This is a writer and a successful trader who built his career and showed everyone that it is possible to achieve any heights. We will look at Schwager's biography and also talk about his books and advice for beginners.

Jack Schwager: biography

To begin with, we note that the hero of our article was born into an ordinary family. His father was a simple immigrant who, wanting to increase his income, decided to try trading on the stock exchange. Perhaps this is what caused Jack Schwager to become interested in such activities in the future. During his student years, the boy was already involved with the stock exchange, so when in 1971 he had to defend his graduation project, he did not even think about the topic and immediately chose those most closely related to mathematics and economics. The guy graduated from college, and then entered college from which he graduated with honors. Immediately after this, he received an invitation to work at a small brokerage company, Reynolds. Then he was offered a position as a securities analyst. He worked here for some time, and quite successfully. After this, a merger took place with another company, resulting in the formation of Dean Witter Reynolds.

First interest in analytics

It should be noted that in those distant times the hero of our article did not have the slightest idea about financial markets and futures, but even then he was attracted to analytics, which he did with joy. Moreover, for a long time he was interested in the issue of constant changes in the market. He wanted to devote time to this and understand the issue well. Gaining experience, Schwager moved up the career ladder. He learned to work independently and accurately predict the direction of trend development. It would seem that his career is going up, but this was not enough for Jack, as he wanted to go on a free voyage.

As an expert

Jack Schwager is an internationally recognized expert in the field of hedge funds and futures. He holds high positions and earns millions of dollars. At the same time, the books he published, which he dedicated to his work, brought him fame. The most famous of them are a series of interviews for various publications “Stock Magicians” and the book “Technical Analysis”.

Career

From 2001 to 2010, Jack Schwager was a consultant and partner at the London-based hedge fund Fortune Group. This organization was engaged in the management of portfolios for those who wanted to become clients of the fund. Private paid consultations were also conducted from leading experts, among whom was the hero of our article. The man devoted more than 20 years to active work on Wall Street, where he moved from company to company and increased his experience and skills among people who were engaged in futures trading. By the way, until recently he worked for Prudential Securities. At the moment, Jack Schwager runs a company that distributes the assets of the British and Americans.

Writing books

As for the writer’s books, we note that he himself does not consider himself particularly talented in this matter. Moreover, he does not consider himself among the group of authors who give advice on increasing wealth. He bases his recommendations only on his own experience and many examples of his colleagues. That is why he believes that he shares advice and tells his own story, from which everyone can draw their own conclusions.

First risk

One day, future trader Jack Schwager borrowed $2,000 from his brother. It should be noted that in his first case he immediately went bankrupt. However, the money had to be returned, so he decided to dive even deeper into market research. Thanks to this, after some time, Schwager was able to get a job and develop his own rules of technical analysis. Constantly working and improving, he managed to combine with the fundamental, thanks to which he became a real leader in the matter of forecasting quotes.

Success

And now an excellent expert on futures and hedge funds is engaged in analytics and conducts private consultations. It must be said that he made mistakes quite often, but most often through his own example. He almost always fulfilled outside orders perfectly, and tested his weaknesses in his personal affairs. Thanks to the fact that he saw his mistakes, Jack learned to correct them; this also led to the fact that over time they began to trust him with the most important tasks. At the same time, he was trying to understand exactly how famous traders managed to amass a huge fortune and earn an incredible amount of money from trading securities. After many years of studying this topic and communicating with professionals, the man realized that in fact, the choice of a trading system or a specific strategy makes absolutely no difference. The thing is that each trader builds his own system, which either works or disappears. It would seem that this is on the surface, but we see that each trader has his own individual approach. Making your own way on your own is the main secret of success.

Principles

Jack D. Schwager outlined the basic principles of trading, which we will discuss below. Firstly, the expert stated that there is no specific technique that would work equally effectively for everyone. This is why every trader should start by creating his own path. At the same time, you need to study the experience of other people and take something rational from it for yourself. However, in no case should you exactly copy the method of a successful person, since, in the end, this will still lead to loss. This idea is basic in all of Jack Schwager's books.

The second principle of trading is that the first place should not be trading methodology, but money management. It is clear that beginners focus specifically on their method of work, and forget that even the money they earn needs to be able to manage correctly. In other words, capital needs to be invested in something in order for it to generate passive income. Many people forget about this and lead a wasteful lifestyle, and then wonder why they cannot raise a decent amount of money or realize their dream.

Is it worth it?

Schwager's key trading principle is based on the fact that every person, before committing his life to trading, must calculate the maximum portfolio risk. This is pure analytics, which is necessary in order to understand whether there is any point in acting in this direction. A beginner is unlikely to be able to conduct a complete analysis on his own, so it is better to contact a specialist. This is not such an expensive service, but it will allow you to either set yourself up for a real opportunity to make a profit, or completely abandon an unsuccessful idea.

As for the fourth principle, it says that whenever and however you enter a trading exchange, you should always know how and when you can exit it. Thus, you need to understand and know all possible exit routes if the need arises to use them.

The expert gives excellent advice in “Technical Analysis”. However, we will consider his main recommendations, which are easy to find on the Internet, without even reading the book. At the same time, all those who are determined to engage in stock exchanges are strongly recommended to carefully study Jack Schwager’s book “Stock Wizards”. Before moving on to the advice itself, I would like to note that the trader himself often says that his work is based on a systematic approach and careful study of charts. So what recommendations can the hero of our article give to beginners?

Firstly, you need to understand that markets are not as unpredictable and random a system as they are trying to convince from the outside. Still, we must be aware that the market functions thanks to people, that is, a huge factor influencing the entire system is psychology. It is advisable to study this topic in great detail, as it will allow you to understand some points that are important for business, which can be analyzed even without being a professional expert or analyst. The man also insists that there are no rules in trading on the stock exchange. In other words, we can say that there are effective methods, but they do not guarantee that profit will be made in your case. That is why Jack advises using effective techniques, but not forgetting to build your own strategy. The man also strongly recommends not to forget that there are other ways to make money. In other words, it is not necessary to focus solely on making a profit from the exchange. Yes, you need to study this topic, understand it, and then act based on the knowledge gained. But don't spend your days trying to figure out future market turmoil. It is much more effective to devote this time to finding a new source of income.

Philosophical implications

Now let's talk about two more philosophical pieces of advice given by a talented expert. The first of these concerns the fact that the secret of success is hidden in individuality. Jack Schwager is confident that an effective strategy can only be created by a person who follows his true self. The second philosophical secret is that earning a good income is inextricably linked with innate talent. At the same time, Schwager emphasizes that it is simply impossible to realize talent without enormous effort and tension.

The next thing the hero of our article talks about is success in life. In other words, Jack believes that trading is a truly worthy, great cause that does nothing in itself. It receives any significance only in the life of a generally successful person. The last piece of advice, which we have already indirectly mentioned, concerns the fact that the main task of a novice trader is to study in detail the history of his predecessors and create something new and unique.

By the way, it should be noted that the Fundseeder platform is the brainchild of our hero. This is a popular investment firm that strives to connect the best investors from around the world with qualified trading talent.

Jack Schwager, whose biography we reviewed, is a unique, interesting personality who, over the course of his life, has managed to create an incredible approach to trading. This person teaches ordinary people how not to be afraid and create their own methodology, not to be afraid to follow themselves. Moreover, all these beautiful words are based on real facts and research. Let's not forget that Jack Schwager is an amazing analyst. That is why all novice traders simply must familiarize themselves with the biography of this person and his main works.

Book “Technical Analysis. The Complete Course" was published in 1995, went through several reprints and still remains one of the key studies in the field of stock markets. It is one of those books that should definitely be in the library of a professional trader.

The 2016 edition weighs one and a half kg.

The book is quite lengthy - 800 pages. It will take several months to read them and master them in practice. The entire course with a detailed description of the techniques consists of two parts and five divisions.

The first, theoretical part of the book, tells about graph analysis and the ways of their interpretation, and the individual approach to their application.
In the second part, Schwager examines specific trading situations and explains how to apply graphs in practice.
In the final part we give current advice for existing traders and practical notes on risk management.

The book covers all 4 types of technical analysis:

Graphic
Computer
Candlestick
Wave

Topics covered in the book:

Trend lines, trading ranges, support and resistance levels
Types of graphs, tic-tac-toe topics covered
Features of futures trading (how to stitch together charts)
Technical indicators
Graphical analysis figures
Candlestick patterns
Automated trading systems

The section on trading systems takes up about 150 pages, despite the fact that a minimum of theoretical reasoning is used here. Schwager focused on the algorithm for building a working system and examined in detail each stage of creation (from choosing the type of model to testing the results).

At the beginning of the book, Schwager emphasizes: « The key to success in the market is to buy low and sell high ", which traders often forget. He also emphasizes the need for “ follow a trading strategy, and not rush from one extreme to another, looking for the “Grail”».

It describes graphical processes and, most importantly, the pitfalls that often await every market participant in accessible language. The basic text is supplemented with many interesting examples.

Schwager's Technical Analysis could be compared to Thomas DeMark's counterpart, Technical Analysis - The New Science. The difference is that Demark offers his own research method, and Schwager, instead of personal methods, combines all the existing 4 types of analysis in one textbook.

“Technical Analysis” by Jack Schwager is a veritable desktop “bible” for hundreds of “techies”, which describes in detail all kinds of methods for analyzing the futures, stock and foreign exchange markets. He explains how to determine trading efficiency and evaluate the performance of a trade.

The most valuable thing here is more than 200 pages of examples of real trades based on the analysis of graphic patterns. Transactions, both successful and unprofitable, are considered, and each example is givenseparate comment. The main emphasis is on the practical use of technical analysis. Indicators, oscillators, Japanese candlesticks and other tools are covered in detail.

Read or download - Jack Schwager Technical Analysis Complete Course

"Technical analysis. The Complete Course" 2016 edition is sold from the publisher Alpina and in stores such as OZON. The price of the book in paper version is about 1200 rubles.

For information.

Video interview with the author of the book

With a biography of Schwager and a summary of his book entitled " Technical analysis» we read in the previous publication. Today we’ll take a closer look at what interesting things Jack told us, and what we should pay close attention to when studying the impressive 800-page “work.”

Re-reading this textbook several years after first reading it, I noticed some points that had previously been ignored due to inexperience, or that were simply “safely” forgotten. And the first such chapter, or rather a paragraph, is devoted to the “rule of seven.”

Rule of seven according to Schwager and Sklarew

The “Rule of Seven” is based on multiplying the value of the first impulse in a new trend by coefficients calculated as follows:

For bullish buying target odds, the number 7 is divided into 5 (7/5 = 1.4), 4 (7/4 = 1.75) and 3 (7/3 = 2.33);
For bearish sell target ratios, the number 7 is divided into 4 (7/4 = 1.75), 3 (7/3 = 2.33) and 2 (7/2 = 3.5).

Next, the result of the multiplication operation is postponed from the starting point of the movement. Only two questions remain:

how to recognize an impulse?
how to find its end point?

Schwager’s “Technical Analysis” does not provide answers, so we recommend determining the trend break by breaking the last high in a downtrend (and the low in an uptrend). To identify the moment of completion of the impulse, a regular ZigZag is ideal.

For example, the following figure depicts a situation that could be observed on the daily chart of the GBPUSD pair:

As you can see, the targets worked out perfectly; moreover, at point (1) the broken support level (corresponding to the second target) later acted as resistance when the bulls tried to reverse the bearish trend.

IN Schwager's technical analysis It is also said that when trading on large timeframes, the strongest levels are the targets closest to the beginning of the impulse. From the example with the pound, it becomes obvious that this rule really works, since the first two levels were worked out perfectly, and the third was taken only on the second try.

If trading is supposed to be on small time frames (less than daily), then distant targets become more reliable levels, i.e. the rule becomes diametrically opposed.

Finding Cyclic Patterns

Many novice traders have heard a lot about cycles, and knowledge about this phenomenon comes not even in the process of purposefully studying speculation methods, but much earlier - at school (in history lessons), university (when studying economic disciplines) and from the TV screen (when watching the news ). But what is the use of theoretical knowledge if it cannot be applied in practice?

When describing the analysis of cycles, Jack took a different path: firstly, he immediately gave specific examples of real-life cyclical models, for example, the forty-year cycle in the stock market ( drawing from the book “Technical Analysis” by Schwager):

I also recommend these two theories:

Secondly, in addition to the fundamental explanation (based on the imbalance of supply and demand), with which many people associate the nature of cycles, the author, as a professional trader, adds a psychological explanation that explains the principle of behavior of market participants. Of course, there is nothing fantastic or new here, but most ordinary textbooks will not talk about this, since they are built on outdated paradigms.

Third, Schwager provides a complete algorithm for searching, analyzing and smoothing cycles, while all calculations are accompanied by examples (the most popular of them are the Dow index and corn prices) and formulas. All that remains is to arm yourself with MathCAD or Excel and “run” the quotes of the required currency pair according to the instructions.

Separately, I would like to draw attention to the fact that, unlike some “researchers” (no less popular, which is even surprising), Jack does not identify cycles with fluctuations in indicators such as Stochastic or RSI, although the part of the book devoted to cycles also called "oscillators and cycles". This is another evidence that the author has studied the topic well and knows what he is writing about.

Author's trading systems

It would be at least strange if Schwager’s “Technical Analysis” did not mention the author’s trading methods. Jack described his vision of the market in detail in Chapter 18 of the book, so we won’t analyze them in detail today; we will only note that the logic of work in this case is based on an old but proven strategy based on “breakout of the trading range.”

In addition, to improve efficiency, Schwager added some of his own add-ons and concepts, for example, a “signal range” (from the English Price trigger range), a breakdown of the boundaries of which is a signal to buy/sell.

The only thing we can recommend here is immediately optimize Schwager analysis in relation to today's realities, since since 1994-95. (used by the author when searching for examples) almost all instruments in the markets have become more liquid and volatile.

A popular publication for traders, “Technical Analysis. The Complete Course,” which was published in 2016, contains five parts:

Chart analysis: types, trends, trading ranges, chart patterns, etc.
Graphical analysis in real life.
Oscillators and cycles, analysis of futures market cycles.
Trading systems and trading performance measurement.
Advice for practicing traders from the author.

Jack Schwager's book Technical Analysis. The Complete Course" consists of 800 pages, which detail the most important information for traders:

How to analyze, interpret and apply graphs.
How to use charts in practice in trading situations. A detailed description of the positive and negative aspects is given.
How to manage risks. Current advice.
How to use trading systems, oscillators and technical tools.

The author attaches great importance to the consideration of four types of analysis: graphical, wave, computer and candlestick. He explains which signals can be considered false, what is the reliability of failed signals in the future, and how to correctly analyze your own transactions in order to identify their effectiveness and, if necessary, change tactics.

Also, after reading Jack Schwager's book, you can learn a lot of other useful information on the following topics:

Automated trading systems.
Trading ranges, resistance and support levels, trend lines.
Candlestick patterns.
Futures trading rules.
Shapes and graphical analysis tools.
Technical indicators.

In the section on trading systems, the author uses a minimum of theory, giving preference to a practical algorithm for creating an effective system, having considered all stages of its formation, from choosing a specific model type to testing the results.

Some compare this book with the equally famous work “ Technical analysis is a new science» Thomas DeMark, which is also dedicated to the study as a science. Their only difference is that Schwager considers all 4 types of analysis, and Demark describes only his own developed methodology.

It takes about one month to read Jack Schwager's Technical Analysis, and during this time you can fully master the most important knowledge for a trader:

Methods for analyzing futures and stock markets.
Determination of trade profitability.
Determining the effectiveness of transactions.
Familiarization with common mistakes.
Ways to prevent negative situations.

Schwager’s book also allows you to get acquainted with examples of real transactions with positive and negative results. For each example, the author provides comments: where the mistake was made, how the situation could have been avoided, and how to use technical analysis in practice.

Download “Technical analysis. The Complete Course by Jack Schwager

Supporters of books in electronic version can download “Technical Analysis. The Complete Course" for free in PDF or DOC formats. You can also read the book online or buy it in print. Sources provided below:

Buy and download “Technical analysis. Full course" in fb2.zip, epub, mobi.prc, a6.pdf, a4.pdf formats
Buy “Technical analysis. The Complete Course" by Jack Schwager on Fb2, ePub, PDF, Mobi

Unfortunately, the audiobook is not freely available, but you can find it and buy it in the official online store.

Jack Schwager is not only a talented trader, but also an experienced manager. He began his journey in 2001, becoming a partner in a hedge fund. Fortune Group" in London. During that time, he advised clients and developed portfolios for various Hedge Funds. He later moved into futures trading and did so for many years.

Schwager is now managing director of Fortune Group. As the trader himself admits, he learned to predict trend directions from his own experience - both positive and negative. To return the lost money, Jack began researching and developing the rules of technical analysis, on the basis of which a book was subsequently published.

There is no need to follow the example of other people: you should independently choose the most suitable technique for yourself, having studied each of them from the experience of wealthy traders.
Markets are constantly changing, but they can be the same in some ways.
Fruitful trading requires talent, high concentration and the ability to think quickly and logically.
Sometimes knowledge and experience are not enough for successful trading: success in life must also be present.
Knowing how to manage money is more important than trading technique.
Before starting trading, you need to calculate even minimal portfolio risks.
Before entering a trade, you need to determine when to exit it.

To master and put into practice all the methods of a famous trader, just download and read “Technical Analysis. Full course." According to many people involved in trading on stock exchanges, this publication logically substantiates each technique and situation, shows all possible methods of using technical analysis, but the author places the greatest emphasis on situations in which certain tools will be relevant.