Readers reviews of
Encyclopaedia of Chart Patterns
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This is a detailed and exhaustive book that stands, if you will excuse the pun, head
and shoulders above the competition. It is a great reference book and is not really
designed to be read cover to cover.
The problem with this type of work is the way it must, but nature of its exhaustive
coverage, include patterns which are only just slightly different from other patterns. And
these of course must be given new names. This can lead to confusion. It is doubtful that
readers will ever use more than just a handful of these patterns, or learn to recognize
them. However, as a research tool the book is much more useful.
There are some limitations on the book. They include its sole reliance on the US
market. This brings up a number of specific patterns that develop in response to market
maker activity rather than to trading activity. The conclusions drawn, and the reliability
of these patterns may be quite different in other markets.
Personally I would disagree with some of the pattern definitions that Bulkowski applies
but this is hardly a major criticism. For instance he does not require a flag to be
associated with a flag pole, and by ignoring this he misses a most valuable technique for
price projections which also increases the reliability of the pattern.
His focus on failures is also very useful because it helps set up the conditions for
success and for failure. It is no good hanging on hoping that a pattern will develop as
expected. We must also know when the pattern is failing so we can get out with minimum
What Bulkowski calls a pennant we might call an equilateral triangle. The general
conclusions remain valid for the pattern no matter what it is called.
This is a useful reference book. I use it as a guide, but I treat the reliability
statistics with some caution in our markets.
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