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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 losses.

 

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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