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 If you are a technical trader who uses arithmetic scale daily bar charts to arrive at your trading decisions, you will find that Techniques of a Professional Commodity Chart Analyst by Arthur Sklarew is a superb collection of analytical and forecasting techniques. Most of these techniques are not to be found in other standard works on this subject, so much of the work in this book is original.
The book consists of concepts and techniques that Sklarew has developed over many years of experience and observation. The intended audience is one of experienced chartists already familiar with well known elementary techniques that are already covered in other texts, such as Belveal's Charting Commodity Market Price Behavior. Though some of the material will be "old-hat" to experienced chartists, this is generally covered only briefly, with the majority of the text devoted to new and innovative material.
Sklarew emphasizes throughout the book that the best word to describe chart analysis, and what it is all about, is TREND. Most techniques described have the purpose of identification of trend direction. He divides all techniques into two separate categories of chart analysis:
| 1. |
General price chart techniques |
| 2. |
Automatic trading techniques |
Both are based solely on market action.
 Sklarew's "Rule of Multiple Techniques" is described as being of paramount importance in chart analysis. It requires the analyst to disregard any chart signal that is not confirmed by other techniques or technical indicators. The accuracy of forecasts related to general price charting techniques is greatly improved by following this rule.
His "Principle of Selective Techniques", which applies to automatic trading methods, states that the trading method that works best in a particular market, at a particular time, is the one that should be used in that market at that time.
General Observations of Interest
Other general observations of interest: Sklarew advocates that the technical trader always be aware of the fundamentals, and not "turn a deaf ear" to fundamental analysis. He refutes the Random Walk Theory, which postulates that price movements are random and past market action has no effect on future market action. Further, he tells us that price chart analysis is based on the theory that prices move in trends, and past price behavior can give clues as to future trend direction. He dismisses volume and open interest as two of the "least important tools".
Sklarew emphasizes that, of the many tools and techniques available to the chart analyst, the techniques selected should be the ones most suited to one's temperament and taste. "The tools that seem to serve one best are the tools best used."
Major sections of the book deal with techniques relating to interpretation of chart formations, trendlines and projection of price objectives, oscillators, moving averages and long-term (weekly) charts; on each of these topics, as is typical of the whole book, the material and ideas the experienced chartist is likely to be familiar with from past reading is covered briefly while new techniques and ideas take "center stage".
A chart pattern new to most readers will be the "drift pattern", which gives important advance warning of impending trend change. Sklarew discusses and summarizes Elliott Wave Theory, but gives it a negative assessment: "...the complexities of Elliott Wave Theory make positive interpretation difficult and subjective."
Trendlines are rated one of the chartist's most valuable tools. He describes trendline techniques for using initial, intermediate and final "predicted trendlines", as well as for "reaction predicted trendlines", a technique that seeks the end of countertrend reactions and resumption of the major trend, and for "curved trend channels".
In my opinion, the most interesting section and set of techniques relates to methods of projecting price objectives. These must be viewed as supplementary and subordinate to basic trend analysis. Of 12 methods taught, the 2 he emphasizes most heavily appear to be uncannily accurate: The Rule of 7 and the 17-35 Measurement. Every trader should become familiar with these methods, if he or she is not already!
The book explores a variety of oscillator techniques with their chief value emanating from the tendency of oscillators to often reverse direction in advance of the price trend itself. The most important technique he shows us is the daily net change oscillator and how to use it in forecasting minor trend reversals.
The author explores moving average techniques thoroughly, along with all aspects of moving averages. Included are detailed descriptions of the famous 4-, 9-, and 18-day moving average system and the summary results of Frank Hochheimer's landmark studies on optimized moving averages.
Although written in the "pre-computer" era (1980), this is one of the most practical and useful books on charting and analytical techniques the reader can hope to find. I heartily recommend it. The charting techniques may be applied to individual equities and indices, as well as to futures. |
