Technical Analysis Using Multiple Timeframes

I’m just a fledgling investor, but I already have several books in my financial library because I collect books like a miser does gold. However, if I had to choose just one financial book, so far it would be Technical Analysis Using Multiple Timeframes, by Brian Shannon. It was a Christmas gift to myself and it was a good one. The book isn’t cheap, in fact at around $80 it is the most expensive I’ve purchased so far. But I figure that if it keeps me from making even one big mistake in today’s volatile markets it will have paid for itself.

The book dwells heavily on the concept of stage analysis, as popularized by Stan Weinstein in his book Secrets for Profiting in Bull and Bear Markets (another one of my favorites). The first part of Shannon’s book is spent discussing the four market stages in detail, including ways to identify when each stage may be coming to an end. The book then goes into detail about such vital information as support and resistance, trends, volume, and moving averages. Next are chapters describing how and when to buy, to sell, and to sell short. He then describes risk management techniques, his basic trading rules, and how to put it all together.

One of my favorite concepts in the book is the idea that a person should choose a primary, secondary and minor timeframe based on the type of trader he or she is. Then the primary timeframe is used for idea generation, the secondary trend is used to establish support and resistance lines for risk/reward analysis, and the minor trend is used for fine-tuning and to establish entry and exit points.

For example, if a person is a swing trader, it is suggested that he use the daily timeframe to get trading ideas, the 60 or 30 minute timeframe to establish risk/rewards, and the 10 minute timeframe for entry and exit points.

Shannon’s trading rules are no-nonsense and easily grasped. For example:

· Trade in the direction of the primary trend, as determined by the 50 DMA.
· Be aware of overall trends as well as key support and resistance levels.
· Define your risk based on support and resistance levels rather than percentages or other random methods.
· Buy as a stock breaks out past short-term levels of resistance.
· Cut losses as soon as your stops are violated.


And as Shannon says almost nightly in his Alphatrends.com technical analysis videos, “The market does not care what you think a stock should do. Remember, only price pays!”

Lady

I already reported on this book, but here is someone else's take on it. Their review was a good reminder to me to go back and reread my copy of the book.

Book Review: Brian Shannon's 'Technical Analysis Using Multiple Timeframes'

By Smart Guy Stocks, April 30, 2009

"If you follow my trades and comments, you know I am more of a trader than investor. Given the recent per se deceit flowing from the mouths of government officials and CEOs, I have been spending increasingly more time honing my trading skills because investors (and the public at large) are apparently nothing but suckers.



I have learned this lesson perpetually since graduating during the dotcom bubble, experiencing the bubble's implosion, watching Fortune 500 companies lie and steal (e.g., Tyco, Worldcom, Enron, etc.), realizing the Federal Reserve purposefully caused new bubbles in the housing and credit markets, and now witnessing the new wave of legal con artists at Bear Sterns, Merrill Lynch, Lehman, Fannie Mae (FNM), Freddie Mac (FRE), et al. Rather than get angry and fill my days discussing moral hazards, I've decided to accept reality and enjoy myself while reading Brian Shannon's Technical Analysis Using Multiple Timeframes.



First, let me preface my review by noting that I am extremely skeptical of marketing experts who sell trading systems and technical analysis products. However, I believe the Internet will allow a handful of successful investors and traders to build a loyal following if and only if said followers can make money. Brian is going to be one of those success stories.
When I first received Brian's book, my wife joked, "How's your textbook?" However, I think she was spot-on with her accidental compliment. Like a short textbook, Technical Analysis Using Multiple Timeframes is laid out in a very logical fashion and offers loads of practical knowledge. I would classify the book as intermediate level material, although it's an excellent resource for technical analysis newbies.


For purposes of this review, the book has four sections. In the first section, Brian introduces technical analysis, explains the four stages of a market cycle (accumulation, markup, distribution, and decline), and details the major variables in his methodology (price, support and resistance, trends, volume, moving averages, and time). In the second section, he shares his secrets about how and when to buy long and sell short.
In the third section, Brian addresses news and fundamentals concerning companies and their stocks, then he has a very nice intermediate/advanced analysis of short squeezes (and how to profit from them). In the fourth section, he offers invaluable wisdom on risk management and exit strategies, his personal rules and insights, and an excellent conclusion entitled "Putting It All Together."


It's hard for me to go into too much detail because I don't want to explain Brian's system and defeat the purpose of reading the book. So, here are some core characteristics to consider:


Brian is a pure trend trader. If there's no trend, he ain't trading.
Brian possesses professional insights into market structure and the psychology of supply and demand.
Brian is religious about risk management.


If you are serious about becoming a better trader or learning how to improve your buy and sell decisions, Brian's book will pay for itself the next time you make a transaction. Unlike countless "classics" that spend 200 pages preying on our get-rich-quick tendencies, Brian skips the infomercial and delivers a practical framework we can use to make money or preserve capital."

http://seekingalpha.com/article/1342...ple-timeframes


Lady

Lady:
I think highly of Brian Shannon, and although I don't have his book, I have watched his videos from time to time. A little boring to listen to - but great stuff. I am a firm believer in trading in the direction of the primary trend (don't fight the river) and multiple timeframes for decision making.
*** 5 Stars***

Thanks for the reviews, sounds like he's my kinda guy strategy-wise, also sounds like there's something I can still learn from him at the intermediate level-time considerations especially-I know there's still a big hole in my education on that one. I have more to learn on risk-management and analysis of fundamentals also-that I know as well. Looks like a book I'll be acquiring.

It's not cheap, Allie. In fact, it's by far the most expensive single book in my financial library. But it's probably the one I learned the most from, too.

Lady