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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Books

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 10/24/2014
16,805 127.51 0.8%
8,569 82.62 1.0%
584 6.67 1.2%
4,484 30.93 0.7%
1,965 13.76 0.7%
YTD
1.4%
15.8%
19.0%
7.4%
6.3%
Tom's Targets    Overview: 10/10/2014
17,100 or 16,350 by 11/15/2014
8,700 or 8,000 by 11/01/2014
600 or 560 by 11/15/2014
4,600 or 4,200 by 11/15/2014
2,000 or 1,900 by 11/15/2014

Written by and copyright © 2005-2014 by Thomas N. Bulkowski. All rights reserved.

My Books

 

 

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Below, hover your mouse on a book picture for pricing information then click on it to take you to Amazon.com for browsing and buying. Anything purchased at Amazon.com through this website (by clicking on a book link) helps support this site.

One of the questions I am asked often is what is the difference between my books. Encyclopedia of Candlestick Charts is all about candlesticks, tearing apart how they work using simple statistics and user-friendly analysis. Encyclopedia of Chart Patterns is the same as the Candlestick book, but it covers chart patterns and event patterns. Trading Classic Chart Patterns introduces a scoring system to help you select chart patterns that work. Getting Started in Chart Patterns is a book about chart patterns for both the novice and expert trader because it covers areas of chart patterns not discussed in my other books. But you can think of it as a lite version of my Encyclopedia of Chart Patterns book with a less in-depth look at chart patterns and a heavier focus on how to trade them.

Here's a testimonial that's worth reading not for what he says about my books (which is nice) but about his success trading the markets.

Dear Mr. Bulkowski,

I'm a 22-year old college student and an options trader. For the last year and four months, before June, I virtually traded options at real time, turning one hundred thousand into five million. Then, at the beginning of the summer, I opened my first real money account, and have made a little less than 1,200% on my account, never having more than 30% of my entire account invested at one time, never having more than 15% in one stock (now no more than 10%, eventually I'll get it down to having no more than 5%).

I got started in charts with Getting Started in Chart Patterns, I followed that book with Encyclopedia of Chart Patterns, and followed that with Trading Classic Chart Patterns, with the recommendations listed on Dan Zanger's site. I loved those books so much that I bought Encyclopedia of Candlestick Charts, since I'm a fan of charts. I was amazed at how much I had already figured out. You put names to what I was just observing and statistics that made me even more profitable. I keep both your encyclopedias next to my computer while I go over my stocks ever night, and I see a break out.

My parents are mad at you because now they can't claim me on their taxes this year. Just kidding, I bought my dad the boat he always wanted because they matched my account which gave me a few extra dollars to play with.

I hope your trading is doing well and your doing well.

Thank You So Much. Your Books Are Awesome.

-- Trader01603

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Getting Started in Chart Patterns, Second Edition

Chart pattern analysis is not only one of the most important investing tools, but also one of the most popular. Filled with expert insights and practical advice from one of the best in the business, Getting Started in Chart Patterns, Second Edition helps new and seasoned traders alike profit by tracking and identifying specific chart patterns.

Substantially revised and expanded, this new edition of the popular guide now includes additional charts for ETFs and mutual funds. It introduces more than 40 key chart formations, as well as trading tactics that can be used in conjunction with them. It supplies actual trades (with dollar amounts), along with author Thomas Bulkowski's frank discussion of how trading behavior can affect the bottom line.

Interwoven throughout the technical presentations are fascinating anecdotes drawn from the author's quarter-century as a professional trader that vividly demonstrate how one of the best in the business leverages the power of chart patterns.

Getting Started in Chart Patterns, Second Edition Table of Contents

Preface to First and Second Editions

Acknowledgments

Chapter 1: Introduction to Chart Patterns

Chapter 2: Identifying Chart Patterns

Chapter 3: The Truth about Trendlines

Chapter 4: Support and Resistance: The most Important Chart Patterns

Chapter 5: Ten Buy Signals

Chapter 6: Ten Sell signals

Chapter 7: Special Situations

Chapter 8: Busted Patterns: Making Money by Trading Failure

Chapter 9: More Trades: Putting it All Together

Chapter 10: The Art of Trading: Checklists

Chapter 11: Crunching the Numbers

Glossary

Visual Index of Chart Patterns

About the Author

Index

Testimonial

"I started out in late 2003 with $123,000 in our multiple IRA accounts. My results, focusing exclusively on the Precious Mining Junior Exploration Companies, really took off AFTER I read your [Getting Started in Chart Patterns] book. By March 2006, our IRA accounts had exceeded $1,000,000. Your explanations of Support & Resistance; Fibonacci retracements; and High, Tight Flag formations really paid off!" -- email from Rich K. of California

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Endorsements

(from the book cover):

"When it comes to chart reading, Thomas Bulkowski can be categorized as a sui generis (constituting a class alone). Combining objective analysis with a fictional element has resulted in a highly entertaining read, one that any trader will benefit from." Jayanthi Gopalakrishnan, Editor of Technical Analysis of Stocks & Commodities magazine.

"Nobody explains the nuts and bolts of how - exactly - to use chart patterns to make real money in trading like Tom Bulkowski. I always do better in my own trading after reading a Bulkowski book. This is the practical, down-to-earth guidance you have been looking for in books on technical analysis. Bulkowski doesn't give you platitudes - he gives you live examples. Even better, he admits that patterns don't always deliver what we expect and he quantifies both success and failure rates for the top moneymaking patterns. Nobody writes about chart work better than Bulkowski." - Barbara Rockefeller, independent trader and advisor (www.rts-forex.com), author of Technical Analysis for Dummies.

"In Getting Started in Chart Patterns, Bulkowski offer easy-to-apply advice for looking at charts and making them work more effectively for you in your trading. It is his passion; it probably also will become yours after reading this book. A must for budding technicians!" - Gail Osten, Executive Editor of Stocks, Futures & Options (SFO) magazine.

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Trading Basics: Evolution of a Trader

This is a portion of the book from the preface

The three books in the Evolution of a Trader series were written for people unfamiliar with the inner workings of the stock market, but will curl the toes of professionals, too.

Research is used to prove the ideas discussed, but is presented in an easy to understand and light-hearted manner. You will find the books to be as entertaining as they are informative and packed with moneymaking tips and ideas. Use the ideas presented here to hone your trading style and improve your success.

Whether you are a novice who has never purchased a stock but wants to, or a professional money manager who trades daily, these books are a necessary addition to any market enthusiast's bookshelf.

Trading Basics

The first book in the Evolution of a Trader series begins with the basics, creating a solid foundation of terms and techniques. Although you may understand market basics, you will learn from this book.

How do I know? Take this quiz. If you have to guess at the answers, then you need to buy this book. If you get some of them wrong, then imagine what you are missing. Answers are at the end of the quiz.

From Chapter 2, Money Management

1. True or false: Trading a constant position size can have disastrous results.
2. True or false: A market order to cancel a buy can be denied if it is within two minutes of the Nasdaq's open.
3. True or false: Dollar cost averaging underperforms.

From Chapter 3: Do Stops Work?

1. True or false: Fibonacci retracements offer no advantage over any other number as a turning point.
2. True or false: A chandelier stop hangs off the high price.
3. True or false: Stops cut profit more than they limit risk.

From Chapter 4: Support and Resistance

1. True or false: Peaks with below average volume show more resistance.
2. True or false: Support gets stronger over time.
3. True or false: The middle of a tall candle is no more likely to show support or resistance than any other part.

From Chapter 5: 45 Tips Every Trader Should Know

1. True or false: Fibonacci extensions are no more accurate than any other tool for determining where price might reverse.
2a. True or false: Only bullish divergence (in the RSI indicator) works and only in a bull market.
2b. True or false: Bullish divergence (in the RSI indicator) fails to beat the market more often than it works.
3. True or false: Price drops faster than it rises.

From Chapter 6: Finding and Fixing What Is Wrong

1. True or false: The industry trend is more important than the market trend.
2. True or false: Holding a trade too long is worse than selling too early.
3. True or false: Sell in May and go away.

The answer to every statement is true.

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Trading Basics Table of Contents

Chapter 1: How to Retire at 36

Chapter 2: Money Management

Trading: How Much Money, Honey?
Order Types: Read The Fine Print!
Position Sizing: My Story
Position Sizing by Market Condition: Bull or Bear?
How Many Stocks to Hold?
A Better Way? Portfolio Composition
Hold Time: How Long is Long Enough?
Hold Time: My Trades
The Money Management Matrix
Should You Scale Into Positions?
Averaging Down: Throwing Away Money or Smart Choice?
Scaling Out of Positions: A Profitable Mistake?
Dollar-Cost-Averaging: Good or Bad?
Using Leverage: An Expensive Lesson!
Leverage Guidelines Checklist
Chapter Checklist

Chapter 3: Do Stops Work?

What Is Hold Time Loss?
Mental Stop: For Professionals Only!
Minor High or Low Stop: A Good Choice
Squaring Off Round Numbers
Chart Pattern Stop: Too Costly?
Stopped by a Moving Average
The Truth about Trendlines
Trendline Stop
Fibonacci Retrace Stop: Deal or Dud?
Fixed Percentage Trailing Stop
Volatility Stop
Chandelier Stop Leaves You Hanging
Testing Six Stop Types
What I Use
Chapter Checklist

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Chapter 4: Support and Resistance

Types of Support and Resistance
Measured Move Support and Resistance
Minor High Resistance
Volume at Minor High Resistance
Minor Low Support
Volume at Minor Low Support
Minor High Support
Minor Low Resistance
Gaps Showing Support and Resistance
Myth: Tall Candle Support and Resistance
Horizontal Consolidation Regions
Another Look at Round Numbers
Support in Straight-Line Runs
Resistance in Straight-Line Runs
SAR Summary
Chapter Checklist

Chapter 5: 45 Tips Every Trader Should Know

1) Timing the Exit: The 2B Rule
2) Busted Patterns for Profit
3) What I Use: Fibonacci Retracements
4) Myth: Fibonacci Extensions Work!
5) Is Indicator Divergence a Dud?
6) Shallow Divergence and the RSI
7) Good Eggs: Indicator Failure Swings
8) Flat Base Entry Pattern
9) Identifying and Trading Gaps
10) The Never Lose Pattern: The Inverted Dead-Cat Bounce

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(Chapter 5 Continued)

Determining Stock or Market Direction
11) What are the Futures Doing?
12) Price Jumps. Now What?
13) Chasing Tails for Profit
14) Tall Price Bar Retrace
Finding the Market bottom
15) Ugly Double Bottom: A Higher Bottom
16) Bullish Chart Patterns Appear
17) Stock Downgrades Plentiful
18) You Feel Like Selling Everything
19) High Volume Bottom
20) Bad News Moves Nothing, Good News Lifts Market
21) Getting in Early: Partial Rises and Declines
22) Pattern Width and Performance
23) Price Drops Faster than it Rises
24) Mirrors for Trend Prediction
25) Trendline Mirrors: Another Reflection
26) Avoid Price Mountains
14 Selling Tips You Need to Know
27) Use Stops
28) Sell When Wrong
29) Sell on the Unexpected
30) Sell on Trend Change
31) Sell Blue Chips 10% Down
32) Indicator Says Sell: Obey It
33) Follow Your Rules
34) Sell on Confirmation of Bearish Pattern
35) Sell at Price Target
36) Sell on Piercing Support
37) Sell on Industry Weakness
38) Weak Fundamentals
39) Sell on Hype
40) What Would Tom Do?
41) Drawing Three-Point Channels
42) Andrews Pitchfork
43) Beware Throwbacks and Pullbacks
44) Triangle Apex Predicts Turns
45) Volume Preceding the Breakout
Chapter Checklist

Chapter 6: Finding and Fixing What is Wrong

What Was the Market Behavior?
Was the Industry Trending?
How is the Timing?
Are All Entry Conditions Met?
Was the Position Size Proper?
Was an Initial Stop Used?
Did You Exit Before the Stop?
What Was the Risk/Reward Ratio?
Did You Average Up?
Did You Average Down?
Are You Buying Out of Season?
Trading Checklist
Chapter Checklist

Chapter 7: What We Learned

Visual Appendix of Chart Patterns

Bibliography

About the Author

Index


Fundamental Analysis and Position Trading: Evolution of a Trader

This is a portion of the book from the preface

The three books in the Evolution of a Trader series were written for people unfamiliar with the inner workings of the stock market, but will curl the toes of professionals, too.

Research is used to prove the ideas discussed, but is presented in an easy to understand and light-hearted manner. You will find the books to be as entertaining as they are informative and packed with moneymaking tips and ideas. Use the ideas presented here to hone your trading style and improve your success.

Whether you are a novice who has never purchased a stock but wants to, or a professional money manager who trades daily, these books are a necessary addition to any market enthusiast's bookshelf.

Fundamental Analysis

This book explains and describes the test results of various fundamental factors such as book value, price-to-earnings ratio, and so on, to see how important they are to stock selection and performance.

The Fundamental Analysis Summary chapter provides tables of fundamental factors based on hold times of one, three, and five years that shows which factor is most important to use for those anticipated hold times. The tables provide a handy reference for buy-and-hold investors or for other trading styles that wish to own a core portfolio of stocks based on fundamental analysis.

Chapters such as "How to Double Your Money," "Finding 10-Baggers," and "Trading 10-Baggers" put the fundamentals to work. The chapter titled "Selling Buy-and-Hold" helps solve the problem of when to sell long-term holdings.

Position Trading

The second part of the book explores position trading. It introduces market timing to help remove the risk of buying and holding a stock for years.

Have you heard the phrase, Trade with the trend? How often does a stock follow the market higher or lower? The section titled, "What is Market Influence on Stocks?" provides the answer.

This part of the book looks at how chart patterns can help with position trading. It discloses the 10 most important factors that make chart patterns work and then blends them into a scoring system. That system can help you become a more profitable position trader when using chart patterns.

Six actual trades are discussed to show how position trading works and when it does not. Consider them as roadmaps that warn when the road is bumpy and when the market police are patrolling.

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Fundamental Analysis and Position Trading Table of Contents

Chapter 1: Introduction to Buy and Hold

What Is Buy and Hold?
Who Should Buy and Hold?
My Numbers: Background and Terms
Now What?

Chapter 2: Stock Selection

What Comes After Large Price Moves?
Myth: Stocks That Drop Least in Bear Market Then Soar
Stock Selection the Easy Way
Two Tips for Stock Selection
Buy Fallen Angels
What Chart Patterns Appear Before Mergers and Buyouts?
What Are Insiders Doing?

Chapter 3: Book Value

Book Value Defined
Value Assets Properly
Investing Using Book Value
When Is Book Value Important?
The Value of Hidden Assets
Limits of Book Value
Buybacks Lower Book Value
Historical Research
Price to Book Value: A Good Measure
Small Caps: Best Choice
Low Stock Price Rules!
Book Value and Return on Equity
What Is the Best Price to Book Value?
Combinations and Performance
Trading Strategy: Beating the Dow
The Eight-Stock Setup
Hold Time for Best Results

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Chapter 4: Capital Spending

Is Decreasing Capital Spending the Holy Grail?
Capital Spending Trends versus Performance
Frequency Distribution
Performance by Market Cap

Chapter 5: Cash Flow

Historical Research Review
Cooking the Books
The Numbers
Is Increasing Cash Flow Good?
Performance by Market Cap

Chapter 6: Dividends

Stock Dividends: An Explanation
Historical Research Review
High Yield, High Performance?
Testing: Yield and Payout Ratio
Which Is Best: Dividends or No Dividends?
Surprise: Dividend Cuts Work!
When Disaster Strikes
Performance by Market Cap

Chapter 7: Long-Term Debt

The Numbers
Is Debt Good?
Sinking Ship: Taking on Debt
Debt by Market Capitalization

Chapter 8: Price-to-Earnings Ratio

History Lesson
Do Low P/E Stocks Outperform?
P/E Trends Down: Good or Bad?
Price and Earnings Combinations: Yawn
Buy Small Caps with Low P/E
High P/E. Time to Sell?
Three P/E Tips

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Chapter 9: Price-to-Sales Ratio

Good Benchmark: PSRs Below 1.0
PSR Trend: Down Is Best
Small Caps, Small PSRs Rule!
Checklist: PSRs by Industry

Chapter 10: Return on Shareholders' Equity

Low ROE Stocks Outperform. Why?
ROE Trend Over Time: Yawn
ROE Performance by Market Capitalization

Chapter 11: Shares Outstanding

Performance versus Shares Outstanding
Event Pattern: Dutch Auction Tender Offers
Should You Sell?
Sell at What Price?
Event Pattern: Common Stock Offerings
Performance and Market Capitalization

Chapter 12: Fundamental Analysis Summary

Performance Rank: One-Year Hold
Performance Rank: Three-Year Hold
Performance Rank: Five-Year Hold

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Chapter 13: How to Double Your Money

How Long to Double?
What Is the Best Buy Price?
Which Market Caps Do Best?
Focus on Fundamentals: Which Are Best?
Warning: Losses Ahead. What You Need to Know
Testing the Setup

Chapter 14: Finding 10-Baggers

How Long to 10x?
What Is Highest Starting Price?
What Happens the First Year?
Rising Over Time: How Fast?
10-Baggers by Market Cap
Fundamental Ratios Common to 10-Baggers
Industries Most Likely to Make 10-Baggers
The Most Popular Years for 10-Baggers
Surprising Finding about 10-Bagger Losses
Backward Testing

Chapter 15: Trading 10-Baggers

10-Bagger Birth
Life of a 10-Bagger
10-Bagger Death
Chart Patterns in 10-Baggers

Chapter 16: Selling Buy and Hold

The Weinstein Setup
Example: The Southwest Airlines Trade
Example: Savient Pharmaceuticals
1-2-3 Trend Change for Downtrends
1-2-3 Trend Change for Uptrends
The Cloudbank Setup
Using Trailing Stops to Sell
Timely Trend-Line Exits
Can Moving Averages Help?
Follow Insider Transactions
Selling: Two Ratio Tips
Selling Down from a High

Chapter 17: Fundamentals: What I Use

Two Book Value Tips
Do Not Get Singed by Burn Rate
Drop Capital Spending!
Current Ratio 2.0
Prospecting for Growth Using Dividends
Rising Earnings, Net Profit
P/E Ratio versus Industry
Litigation: Stop Pissing People Off!
Avoid Too Much Long-Term Debt
Market Capitalization: Big Returns by Going Small
Research Spending
Sales? Think Money
Price-to-Sales Ratio: What About Debt?
Stock Price: 5 to 20
Volume: Thin Ice Ahead!

Chapter 18: Introduction to Position Trading

What Is Position Trading?
Who Should Position Trade and Why?
What Position Trading Will Not Do
Example Position Trade

Chapter 19: Getting Started in Position Trading

Check the News or Lose!
Trend? What Trend?
Trade with the Primary Trend
Take Your Pick: Bottom Fishing or Momentum?
What Is Market Influence on Stocks?
What Chart Patterns Are Best for Position Trades?
Busted Chart Patterns Revisited
Trading Example: Finding Value in Disaster

Chapter 20: Ten Factors Make Chart Patterns Work

What Is a Double Bottom?
Ten Factors Revealed
Scoring System Checklist
Scoring Performance
Higher Scores Work Best
Case Study: Stillwater Mining
Case Study: LSB Industries
Case Study: Lumber Liquidators

Chapter 21: Three Winning Trades and a Funeral

The Intel Fiasco
Hudson Highland Hiccup
CNO Financial Group
Complete Production Services

Chapter 22: What Not to Do: Three Botched Trades

Medivation: Selling Too Late
Coldwater Creek: Selling Too Soon
Hovnanian: Selling at the Bottom

Chapter 23: What We Learned

Visual Appendix of Chart Patterns

Bibliography

About the Author

Index


Swing and Day Trading: Evolution of a Trader

This is a portion of the book from the preface

The three books in the Evolution of a Trader series were written for people unfamiliar with the inner workings of the stock market, but will curl the toes of professionals, too.

Research is used to prove the ideas discussed, but is presented in an easy to understand and light-hearted manner. You will find the books to be as entertaining as they are informative and packed with moneymaking tips and ideas. Use the ideas presented here to hone your trading style and improve your success.

Whether you are a novice who has never purchased a stock but wants to, or a professional money manager who trades daily, these books are a necessary addition to any market enthusiast's bookshelf.

Swing Trading

The last book of the three covers swing and day trading. The first part of the book highlights swing trading techniques, explains how to use chart patterns to swing trade, swing selling, event patterns (common stock offerings, trading Dutch auction tender offers, earnings releases, rating changes, and so on) and other trading setups.

It tears apart a new tool called the chart pattern indicator. The indicator is not a timing tool, but a sentiment indicator that is great at calling major market turns.

Day Trading

Day trading reviews the basics including home office setup, cost of day trading, day trading chart patterns, and the opening range breakout. It discusses research into the major reversal times each day and what time of the day is most likely to set the day's high and low-valuable information to a day trader.

An entire chapter discusses the opening gap setup and why fading the gap is the best way to trade it. Another chapter discusses the opening range breakout setup and questions whether it works.

Ten horror stories from actual traders complete the series. They have been included to give you lasting nightmares.

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Swing and Day Trading Table of Contents

Chapter 1: Introduction to Swing Trading

What Is Swing Trading?
Who Should Swing Trade?
A Swinging Example
Looking Ahead

Chapter 2: Swinging Techniques

Quick Review: Support and Resistance
Trendline Trading
Trading Using Channels
The Three-Bar Net Line Setup
First Thrust Pattern for Swing Trading

Chapter 3: Swinging Chart Patterns

Which Chart Patterns Work Best for Swingers?
Trading the High and Tight Flag
HTF Trade in Insteel Industries
Fishing for Inverted and Ascending Scallops
Scallop Trading Tips
Twice Is Nice: Eve & Eve Double Bottoms
Trading Eve & Eve
Top Seven Frequently Traded Chart Patterns
My Favorite Chart Patterns
Swinging Throwbacks and Pullbacks
Trading Example
CNO Throwback Entry
Measuring Swings
FTO Trade

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Chapter 4: Swing Selling

Selling Ideas
Top 20 Chart Pattern Performers
Diamond Tops and Bottoms
Complex Head-and-Shoulders Top
The Eight Best Exit Signs
My Ten Favorite Sell Signals
Trading Example: The Teradyne Exit
Trading Example: Exiting Forest
Trading Example: Swinging CNO

Chapter 5: Event Pattern Setups

Common Stock Offerings Setup
Surviving a Dead-Cat Bounce
The Inverted Dead-Cat Bounce Setup
Trading Dutch Auction Tender Offers
Earnings Surprise Setup
Earnings Flag Setup
Stock Upgrades and Downgrades
Stock Splits
Setup: Trading Reverse Splits

Chapter 6: Swinging Tools and Setups

The Chart Pattern Indicator
The Swing Rule
Pump Up the Volume or Not
Selecting Winners Using Index Relative Strength
Three Swing Trading Setups
Trading Setup: Simple Moving Average Tests
The Smile and Frown Setup
Trading Smiles and Frowns
Smile and Frown Trading Tips

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Chapter 7: Introduction to Day Trading

What Is Day Trading?
Why Day Trade?
Is Day Trading for You?
What are the Problems of Day Trading?

Chapter 8: Day Trading Basics

Managing Expectations: How Much Can You Really Make?
Building the Home Office
Office Setup Cost
Pattern Day Trading Rules
Wash Sale Rule
Eight Tips for Picking Stocks to Day Trade
Price Reversal Times Revealed!
What Time Sets Intraday High and Low?
Inside Level II Quotes
Heartbeat of the Market: Time-and-Sales Ticker
Pre-Market Checklist
After Market Analysis

Chapter 9: Opening Gap Setup

Opening Gap Test Data
Setup: Fading the Opening Gap
Sample Trade

Chapter 10: Day Trading Chart Patterns

Day Trading Double Tops
Day Trading Triple Tops
Day Trading Symmetrical Triangles
Day Trading Head-and-Shoulders Tops
Day Trading Double Bottoms
Day Trading Head-and-Shoulders Bottoms
Day Trading Triple Bottoms
Other Trading Tips

Chapter 11: Opening Range Breakout

What is Best Range Time?
The ORB Setup
Does the ORB Setup Work?

Chapter 12: Ten Horror Stories

This Is a Winner, Mom. Buy It!
Three Newsletter Disasters
Three Option and Warrant Disasters
Two Missed Opportunities
The $1 Million Surprise

Chapter 13: Closing Position

Chapter 14: What We Learned

Visual Appendix of Chart Patterns

Bibliography

About the Author

Index


Visual Guide to Chart Patterns

The Visual Guide to Chart Patterns is now available.

Visual Guide to Chart Patterns is a concise and accessible visual guide to identifying, understanding, and using chart patterns to predict the direction and extent of price moves. Packed with visual learning enhancements and exercises, this innovative book helps savvy investors and professionals alike master the essential skills of chart pattern recognition. Follow along as chart pattern expert Thomas Bulkowski teaches you to recognize important peaks and valleys that form patterns-footprints of the smart money.

Nearly 200 color charts assist in providing a step-by-step approach to finding those footprints, interpreting them, and following them. Popular patterns such as head-and-shoulders, double tops and bottoms, triangles, gaps, flags, and pennants are just a few of the many patterns explored throughout the book.

For the sophisticated trader or investor, the book also provides statistical research to support the claims of pattern behavior, trading signals, and setups, in an easy to understand way.

  • Discusses chart pattern identification guidelines, psychology, variations, failures, and buy and sell signals
  • Covers the most popular and common chart patterns as well as lesser-known ones like throwbacks, pullbacks, and busted patterns
  • Incorporates quizzes, step-by-step exercises, enhanced graphics and video tutorials (e-book only) to immerse the reader in the world of chart patterns

Designed for use by investors and traders, from beginners to experts looking for a practical, easy-to-use guide, comprehensive reference, Bloomberg Visual Guide to Chart Patterns provides a sophisticated introduction to the world of chart patterns.

See also: FAQ: Which of your books should I buy/read first?

The following is a detailed table of contents that lists major topics covered in the book. This was taken from my manuscript and not from the published text. Some of the content may be different in the published version.

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Visual Guide to Chart Patterns Table of Contents

Part 1: The Basics

Chapter 1: Pattern Recognition Made Easy

The Empty Chart
Finding Peak Patterns
Finding Valley Patterns
Curved Patterns
Diagonal Patterns
Constructing Patterns

Chapter 2: Minor Highs and Lows

Peaks: Minor Highs
Valleys: Minor Lows

Chapter 3: Trendlines

Uptrend Connections
Trendline Types: Internal, External, Curved
Downtrend Connections
Trendline Guidelines

Chapter 4: Support and Resistance

Trendline SAR
SAR at Gaps
Horizontal Consolidation Regions
Round Number SAR
SAR at Peaks, Valleys, and Chart Patterns

Chapter 5: Gaps

Four Types
Identification Guidelines
Quiz Time
Trading Gaps

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Chapter 6: Throwbacks and Pullbacks

Throwbacks
Pullbacks
Identification Guidelines

Part 2: Pattern Identification

Chapters 7-17 follow the same format:
Identification Guidelines
Psychology
Variations
Quiz Time
Chapter 7: Rectangles
Chapter 8: Ascending Triangles
Chapter 9: Descending Triangles
Chapter 10: Symmetrical Triangles
Chapter 11: Flags and Pennants
Chapter 12: Double Bottoms
Chapter 13: Triple Bottoms
Chapter 14: Double Tops
Chapter 15: Triple Tops
Chapter 16: Head-and-Shoulders Bottoms
Chapter 17: Head-and-shoulders Tops

Part 3: Basic Buy Setups

Chapter 18: Basic Buy Setups

Ascending Triangle Buy Signal
Descending Triangle Buy Signal
Symmetrical Triangle Buy Signal
Double Bottom Buy Signal
Head-and-Shoulders Bottom Buy Signal
Rectangle Buy Signal
Triple Bottom Buy Signal
Performance
Simulations
Stop Placement

Chapter 19: Failures

Triangle Failures
Double Bottom Failures
Head-and-Shoulders Bottom Failures
Rectangle Failures
Triple Bottom Failures

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Chapter 20: The Throwback Buy Setup

Triangle Throwbacks
Double Bottom Throwbacks
Pre-Throwback Setup for Double Bottoms
Pre-Throwback Setup for Rectangles

Chapter 21: Measuring Flags and Pennants

The Measure Rule
Measuring Results

Chapter 22: Busted Pattern Buy Setups

Single, Double, and Triple Busts
Busted Ascending Triangles
Busted Descending Triangles
Busted Symmetrical Triangles
Busted Double Tops
Busted Head-and-Shoulders Tops
Busted Rectangles
Busted Triple Tops
Performance

Chapter 23: Trading Setups and Tips

Ascending Triangle Tips
Trading Tips for Double Bottoms
Seven Trading Clues for Head-and-Shoulders
Monthly Symmetrical Triangle Setup
Rectangles

Part 4: Basic Sell Signals

Chapter 24: Chart Pattern Sell Signals

Selling Ascending Triangles
Selling Descending Triangles
Selling Double Tops
Selling Head-and-Shoulders Tops
Selling Rectangles
Selling Symmetrical Triangles
Selling Triple Tops
Exit Signal

Chapter 25: Busted Pattern Sell Signals

Busted Ascending Triangles
Busted Descending Triangles
Busted Double Bottoms
Busted Head-and-Shoulders Bottoms
Busted Rectangles
Busted Symmetrical Triangles
Busted Triple Bottoms
I lost How Much?!

Chapter 26: Triangle Apex Sell Signal

Testing
Trading

Chapter 27: Trendline Sell Signals

Trendline Selling
Triangle Sale

Chapter 28: Swing Rule

Down Trend Swing Rule
Testing Results

Chapter 29: A Tale of Two Trades

Trade Entry
Trade Exit
The Setup
Results
Closing Position

Encyclopedia of Candlestick Charts

Before I get to the slick marketing message, let me give you a few examples of how I use the information in my candlestick book. Imagine that price has been trending upward for 5 bars and you see a bearish engulfing candle pattern. Looking up the candle in the book, you read that it acts as a bearish reversal 79% of the time (page 308), and that 74% of the time (page 312) price reaches its price target (the height of the candle projected downward). If you then see price begin to falter, like it is thinking of reversing, you can exit the trade ahead of everyone else.

Before I make a trade, I look at the probability of the candle acting as a reversal or continuation, and how far price can be expected to move once I am in the trade (based on the candle height). That information is in my book, and it is well worth the cost of it.

Let me give you another example. For Apple stock (AAPL) on November 13, 2007, I found an above the stomach candle. The book says (page 89) that the candle acts as a bullish reversal 66% of the time. The upward target is 183.39 with a 61% probability of reaching 191.33 (page 93). A downward target is 139.84 with a 53% probability of reaching 130.28. The current close is 169.96. After a bumpy start, the stock moved up in a straight-line run to 187.70 on November 30, 2007 before pausing for a few days.

That is the kind of information you can get from my book, and that is how I put it to good use. It gives me an edge over other traders that do not have such information. In short, it helps me make money.

Here is the slick marketing message: Candlestick patterns are footprints of the smart money and deciphering those footprints properly can bring traders and investors riches. Encyclopedia of Candlestick Charts takes an in-depth look at 103 candlesticks, from identification guidelines, to statistical analysis of their behavior, to detailed trading tactics. Never before has a book combined a comprehensive list of candlesticks with a statistical review of their performance...until now.

This easy to read and use reference book follows the same format as the best-selling Encyclopedia of Chart Patterns.

In each chapter of Encyclopedia of Candlestick Charts you'll find:

  • Behavior and Rank shows how each candle is theoretically supposed to work and how it actually does, with rankings against other candlesticks plus the psychology behind the pattern.
  • Identification Guidelines describe what to look for.
  • Statistics include the following tables: general statistics, height statistics, volume stats, reversal rates, and performance indicators.
  • Trading Tactics discuss strategies to increase profits and minimize risk
  • Sample Trade walks you through a hypothetical or actual trade using real data.
  • For Best Performance is a quick reference table of selection tips to boost performance

Encyclopedia of Candlestick Charts also includes chapters covering important findings, a statistics summary, glossary/methodology, and a visual index to make candlestick identification easy.

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Endorsements

(from the book cover):

"Great research, great organization, and a wealth of information. Not only does Tom identify the best formations, he shows the practical way to trade each one. And, he puts the best results right in front, rather than playing hide-and-seek with the reader. You don't need to be a chartist to get value from this book. I highly recommend it." -- Perry Kaufman, author of New Trading Systems and Methods, Fourth Edition

"Man cannot live on bread alone, and according to Tom Bulkowski's research, one cannot trade by candlesticks alone. Tom's intensive statistical work seeks out the truth in the frequency and reliability of trading with candlestick charts. His exhaustive and thorough research will give the reader an eye opener to help guide them in their trading decisions. This is a must-read edition of a high-caliber piece of trading literature for every trader who uses candlecharts." -- John Person, author of Candlestick and Pivot Point Trading Triggers and President of Nationalfutures.com.

"When I wrote the Third Edition of Candlestick Charting Explained, I believed I had thoroughly covered every aspect of this respectable analysis technique. Tom has written a solid reference that can easily be used in coordination with other books in this exciting field. The Encyclopedia of Candlestick Charts is a reference that every technical analyst will want to own." -- Gregory L. Morris, Senior Portfolio Manager, PMFM, Inc, and author of Candlestick charting explained, third edition and The Complete Guide to Market Breadth Indicators.

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Encyclopedia of Chart Patterns, Second Edition

In this revised and expanded second edition of the bestselling Encyclopedia of Chart Patterns, Thomas Bulkowski updates the classic with new performance statistics for both bull and bear markets and 23 new patterns, including a second section devoted to ten event patterns. Bulkowski tells you how to trade the significant events -- such as quarterly earnings announcements, retail sales, stock upgrades and downgrades -- that shape todays trading and uses statistics to back up his approach. This comprehensive new edition is a must-have reference if you're a technical investor or trader.

From the Inside Flap

The Encyclopedia of Chart Patterns, recognized as the premier reference on chart pattern analysis, extends its lead with this Second Edition. This definitive text includes new bull and bear market statistics, performance sorted by volume shape and trend, more than a dozen additional chart patterns, and a new section covering ten event patterns. Significant events-such as earnings announcements, stock upgrades and downgrades-shape today's trading, and Bulkowski gives readers the best information on what happens after those events occur. He also shows you how to trade them and uses reliable statistics to back it all up.

In each chapter of Encyclopedia of Chart Patterns, Second Edition you'll learn the following about each pattern:

  • Results Snapshot-A statistical summary of pattern behavior, including its performance rank, break even failure rate, average rise or decline-all separated by breakout direction and market type (bull or bear)
  • Tour-A broad introduction to the pattern
  • Identification Guidelines-Characteristics to look for
  • Focus on Failures-What failed patterns look like, why they failed, and how to avoid them
  • Statistics-The numbers and what they tell you, separated into bull/bear markets and breakout direction, including average rise or decline, failure rates, volume shapes, performance by size, and busted pattern performance
  • Trading Tactics-Strategies to increase profits and minimize risk
  • Sample Trade-Puts it all together, showing the chart pattern in action, with hypothetical or actual trades using real data
  • For Best Performance-A table of selection tips to boost performance

Encyclopedia of Chart Patterns, Second Edition also includes summary tables ranking chart- and event-pattern performance for easy reference; a glossary; a chapter on methodology explaining what each statistical table entry means and how it was calculated; and a visual index to make chart pattern identification a snap.

The result is today's most comprehensive and valuable technical analysis reference-one that will save you critical time in identifying chart patterns and increase your likelihood of buying near the price bottom and selling near the top.

This book was named one of the year's top investment books in 2003 by Stock Trader's Almanac 2003 (page 98). The Encyclopedia of Chart Patternshas been cited in Candlesticks, Fibonacci, and Chart Pattern Trading Tools by Robert Fischer and Jens Fischer ( pages 88-89, 107), Technical Analysis for Dummies by Barbara Rockefeller ( pages 154 - 165), Advanced Options Pricing Models, by Jeffrey Katz and Donna McCormick (page 382) and many other titles (Amazon.com has the full list). The Encyclopedia of Chart Patterns is available in Orthodox Chinese and German, Russian, French and Simplified Chinese translations are pending.

Amazon.com has a “search inside the book” where you can look at the table of contents, view an excerpt, and do a search.

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Endorsements

(from the book cover):

"The most complete reference to chart patterns available. It goes where no one has gone before. Bulkowski gives hard data on how good and bad the patterns are. A must-read for anyone that's ever looked at a chart and wondered what was happening." -- Larry Williams, trader and author of Long-Term Secrets to Short-Term Trading.

"Chart patterns are the basics behind most trading methods, and this book is a great achievement in a highly useful format. Bulkowski has taken an intelligent and thoughtful approach to producing a practical guide to understanding and trading chart formations." -- Perry Kaufman, author of New Trading Systems and Methods, Fourth Edition and A Short Course in Technical Trading.

Praise for the first edition

"Not since Edwards and Magee has someone put together so comprehensive an assemblage of market behavior expressed graphically. No chartist should be without this book." -- John Sweeney, Interim Editor Technical Analysis of Stocks & Commodities.

Encyclopedia of Chart Patterns . . . is a valuable contribution to the existing literature on charting and should be considered an indispensable reference by any serious chart trader." -- Edward D. Dobson, President, Traders Press, Inc.

"Meticulously researched, complete, and insightful, the Encyclopedia has earned a permanent place on my trading desk as a highly valued resource." -- Thomas A. Bierovic, Manager, Strategy Testing & Development, Omega Research, Inc.

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Trading Classic Chart Patterns

Trading Classic Chart Patternsis a combination narrative and reference book (mostly reference). This book was named “The best investment book of the year” by Stock Trader's Almanac 2003 (see page 94 of that book). Trading Classic Chart Patterns has been cited in Candlesticks, Fibonacci, and Chart Pattern Trading Tools by Robert Fischer and Jens Fischer (Wiley 2003, pages 88-89). Translations into Simplified Chinese and German are pending.

In his follow-up to the well-received Encyclopedia of Chart Patterns, Thomas Bulkowski gives traders a practical game plan to capitalize on established chart patterns. Written for the novice investor but with techniques for the professional, Trading Classic Chart Patterns includes easy-to-use performance tables, vivid case studies, and a scoring system that makes trading chart patterns simple. This comprehensive guide skillfully gives investors straightforward solutions to profitably trading chart patterns. Trading Classic Chart Patterns also serves as a handy reference guide for favorite chart patterns, including broadening tops, head-and-shoulders, rectangles, triangles, and double and triple bottoms. Filled with numerous techniques, strategies, and insights, Trading Classic Chart Patterns fits perfectly into any pattern trader's arsenal.

From the Inside Flap

From the author of the Encyclopedia of Chart Patterns comes his latest work, Trading Classic Chart Patterns, a groundbreaking primer on how to trade the most popular stock patterns. Written for the novice investor but containing techniques for the seasoned professional, this comprehensive guide includes easy-to-use performance tables supported by statistical research. By using a simple scoring system, you'll learn how to predict the performance of a chart pattern almost by looking at it.

If you're new to chart patterns, technical analysis, or to stock market investing itself, the "Getting Started" section provides new ideas on trendlines, support and resistance, placing stops, and avoiding common investment mistakes. As your trading knowledge and experience increase, the "Trading Classic Chart Patterns" section will serve as a handy reference guide for your favorite chart patterns, including broadening tops, head-and-shoulders, rectangles, triangles, and triple tops and bottoms. You'll quickly learn about the Adam-and-Eve combinations of double tops and bottoms, and how to select the best performers while avoiding the losers.

You'll discover:

  • How to use the price trend leading to a chart pattern as a gauge of future performance
  • Why breakout gaps often improve performance-but by less than you think
    • How tall formations perform substantially better than short ones
    • What a partial decline is and how to buy in early for a larger profit
    • Whether high breakout volume really improves performance
    • How to identify horizontal consolidation regions that may stop prices dead in their tracks
    • A new tool, called the horizon failure rate, to assess performance over time

    The scoring system makes trading chart patterns simple. Use the performance tables to score your stock pattern, then add up the scores. If they total above zero, the stock is an investment candidate; if they are below zero, you'll know to avoid that particular stock. It's that easy!

    Trading Classic Chart Patterns is a trader's reference that's destined to become a classic. This book is an invaluable resource that provides the obvious answer-Yes!-for every investor who has wondered if trading chart patterns can be profitable.

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    Endorsements

    (from the book cover):

    "No one -- not even the pioneers of technical analysis like Dow, Schabacker, Edwards, and Magee -- has ever published such an in-depth and objective research on chart patterns as Thomas Bulkowski has in his Encyclopedia of Chart Patterns and his new book, Trading Classic Chart Patterns. Bulkowski sees farther, not only because he stands on the shoulders of those giants, but also because he has the creativity necessary to develop new methods of quantifying the performance of chart patterns and the tenacity required to carry out the laborious research. Highly recommended!" -- Thomas A. Bierovic, author Playing for Keeps in Stocks & Futures: Three Top Trading Strategies That Consistently Beat the Markets

    Book Corrections

    The publisher corrects the books as new printings occur (in theory). If you find a mistake, then contact me, Tom Bulkowski.

    Encyclopedia of Candlestick Charts

    • Page 11: Change "chart patterns" to "candlesticks" in the first paragraph, second sentence: "The percentage of chart patterns with breakouts within a third of the designated..." should read, "The percentage of candlesticks with breakouts within a third of the designated..."
    • Fix the last two paragraphs by swapping the phrases, "overhead resistance" with "underlying support." Find: "Gaps in an uptrend (rising window): Price finds overhead resistance" and replace with: "Gaps in an uptrend (rising window): Price finds underlying support"
    • In the last paragraph, find, "Gaps in a downtrend (falling window): Price finds underlying support" and replace with, "Gaps in a downtrend (falling window): Price finds overhead resistance"
    • Page 182, two lines below Behavior and Rank heading: Change "60% of th time" to "Change 60% of the time"
    • Page 407: change the Figure 46.2 caption from bearish to bullish harami cross.

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    Encyclopedia of Chart Patterns, 2nd Edition

    • Page 28: "Short-term bearish reversal" should be "Short-term bullish continuation"
    • Page 29: "Short-term bearish continuation" should be "Short-term bearish reversal"
    • Page 111: Table 6.8 under Trade the trend lines. In the first sentence, change "broad" to "tall" so it should read "If the formation is especially tall,..."
    • Page 111: Find "Trade the trend lines; stops." highlighted near the bottom of the page. Change "wide," to "tall," so it should read "If the formation is especially tall,..."
    • Page 138: Second line at the top. Change 30% and 60% to 30 degrees and 60 degrees. It should read, "The slope of the price trend line should rise from about 30 degrees at the start to 60 degrees or higher..."
    • Page 143, under Width. Replace the word "tall" with "wide" as in "Narrow patterns perform better than wide ones in a bull market..."
    • Page 196. Change Surprising Findings to "Throwbacks hurt performance and so do breakout day gaps.
    • Page 197. Change Surprising Findings to "Pullbacks hurt performance and so do breakout day gaps.
    • Page 235. Third paragraph from the top, find "only 15 times in this study" and change it to 18 times. Change 383 in the following sentence to 371.
    • Page 248, Table 15.1, Breakout volume. Change 'Heavy' to 'Light' as in 'Light breakout volume is best.'
    • Page 248, bottom of page, Breakout volume. Change the sentence to read, 'Look for light breakout volume but do not discard an EADB just because the breakout occurs on above-average volume.' Two changes were made to the sentence, the words 'heavy' to 'light' and 'below' to 'above.'
    • Page 253, in Average formation length, change "a month" to 2 months.
    • Page 268, in Formation end to breakout. Change "Measured from the left bottom" to "Measured from the right bottom"
    • Page 347, Text for the example says the win/loss ratio is 4.75 to 1 but it's actually less because of the entry price (the bottom of the flag). That lowers the profit potential and raises the risk, so the ratio is narrower. If you forget about the ratio, the method of calculating a price target (the measure rule) is correct.
    • Page 369, under Percentage closed. Change "as do downward breakouts in a bear market" to bull market.
    • Page 376 to 388, even numbered pages, the header should read 'Head-and-Shoulders Bottoms' not 'Heads...'
    • Page 379, line 4 down from the top. Change "by signal sooner" to "buy signal sooner".
    • Page 406 to 436, even numbered pages, the header should read 'Head-and-Shoulders' not 'Heads...'
    • Page 515 under Reversal or continuation in the Statistics section. Change "pattern on exit" to "pattern or exit."
    • Page 532, third line down from the top. Change "about a week shorter" to "about a week longer".
    • Page 627, Table 41.1, Width. Change 'trend' to 'tend' as in 'Scallops tend to be wider...'
    • Page 668. Change 5% to 10% in the line, "With a breakout price of 21.11 and a target of 19, is a 5% decline...
    • Page 693. Swap "Wide" and "narrow" in the paragraph that begins "Width. Wide patterns perform better than narrow ones..."
    • Page 731. Change "higher" to "lower" in surprising findings table as in "Heavy breakout volume helps push prices LOWER."
    • Page 756: swap 164 and 197 in Table 49.2. It should read: 197 R and 164 C
    • Page 902: Table 59.5 is wrong. Here is the corrected table.
    • Days7142128354249566370>70
      Bear market25%8%9%7%8%6%3%3%0%2%29%
      Bull market18%7%5%4%3%4%4%3%2%2%48%

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    • Page 950, page bottom: "Short-term bearish continuation" should be "Short-term bearish reversal"
    • Page 970. Break-even failure rate rank for Rectangle Bottoms, down breakout. Rank should be 14, not 15. And change Rectangles to Rectangle. Overall Rank changes from 12 to 11 and the others move up by 1 through Island Reversals, down breakout (which has an overall rank of not 21 but 20).
    • Page 972, about a third of the way down. Change 'Cup with Handdle" to 'Cup with Handle.'

    Trading Classic Chart Patterns

    • Page 63, Table 3.3. Change 'Percentage above Breakout Price' to 'Percentage above or below Breakout Price'
    • Page 164, Table 8.15. Third column, 'Adam & Adam' should be 'Eve & Adam'

    Getting Started in Chart Patterns

    • Page 23, second bullet item down from the top. Should read 'Expect a larger price rise' not decline.
    • Page 218, Broadening Formation, Right-Angled and Ascending picture in the lower left. Ignore the arrow.
    • Page 219, Table 9.3. Change -50% to 50%.
    • Page 219, Paragraph immediately below Table 9.3. Change 'downward breakouts,' to 'upward breakouts,'

    -- Thomas Bulkowski

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    Copyright © 2005-2014 by Thomas N. Bulkowski. All rights reserved. Books: The original laptop.