Market Technician

Issue 84 - March 2018

The Journal of the

Society of Technical Analysts

IT'S OUR BIRTHDAY! SAVE THE DATE

AND BE PART OF THE CELEBRATIONS

17 25

A Brief History of the Extending the Frontiers

Development of Median of Technical Analysis:
Line Analysis

AKA Andrews Pitchfork the application of W. D. Gann’s

(Part 1) by Timothy forecasting method to the currency
Brackett and Kyle Crystal markets - James Smithson
Contents
Foreword
• IFTA 2018 Conference 04
• Save the date - 50th Anniversary 06

News
• The 30th annual IFTA conference 07
• Photographs from 2017 Annual Dinner 08
• The new STA Home Study Course - Luise Kliem 10
• Our New Membership System - John Abberton 13

Research
• A Brief History of the Development of Median 17
Line Analysis, AKA Andrews Pitchfork (Part 1)
- Timothy Brackett and Kyle Crystal
• Sensemaking: a new twist on what is needed for 21
success in trading and investment
- Steve Goldstein
• Extending the Frontiers of Technical Analysis: the 25
application of W. D. Gann’s forecasting method to
the currency markets - James Smithson
• Did you know? 29

Analyst Focus
• Head and shoulders above - Trevor Neil 30
• The 2016 Bronwen Wood winner describes his 32
experience of the STA course - Marco Meola

Book Review
• STA Book Club - Nicole Elliott 34
• Review of Trading with Ichimoku by Karen Peloille 36
- David Watts

The Society of Technical Analysts

• Benefits of STA Membership 39
• STA Calendar 40
• STA Library 41
• The Education Channel 42
• Balance professional development and your personal 44
life with our new Home Study Course©
• Congratulation! Latest STA Diploma MSTAs 45
• The STA Executive Committee 46
• STA Advertising Rates 47

Disclaimer: The Society is not responsible for any material published in The Market Technician and publication of
any material or expression of opinions does not necessarily imply that the Society agrees with them. The Society
is not authorised to conduct investment business and does not provide investment advice or recommendations.
Articles are published without responsibility on the part of the Society, the editor or authors for loss occasioned by
any person acting or refraining from action as a result of any view expressed therein.

Editor's Letter
Nicole Elliott
Technical Analyst, Private Investor,
E-journalist for the STA
I have a feeling that the electronic only Market Technician, The Journal of the Society of Technical Analysts magazine, has
been a hit. Click and download data confirm and there is anecdotal evidence aplenty, but most compelling has been the
sheer number of articles submitted. In a way this is the lifeblood of the magazine and of the society itself - the pooling
together and exchange of old concepts and new thinking by and for our members.
We encourage all members (and non-members who’ve
stumbled across the magazine) to write in and submit
articles. Caveat: it might be worth checking with
info@sta-uk.org as to length, content and other limitations
before you start bashing away at your keyboard.
In case you’ve missed it, the STA website home page
www.sta-uk.org has a link to the blog that I write, open and
free to view for members and non-members alike. Here I
welcome suggestions and content from MSTAs; just email me
at nicoleelliott50@gmail.com
Another thing to remember is that the exchanges are done
in a collegiate, friendly and genuine way. New members: do
come to our monthly meetings and ask us questions; we’re
all here to help, interact and learn. Plus, this year there are
lots of really exciting events, as well as the regular meetings
on the second Tuesday of each month, now at 18:30pm.
For those of you who didn’t make
January or February’s lecture and
networking, we have a spanking new
venue courtesy of the Chartered
Institute for Securities and Investment
(CISI): the Walkie Talkie tower (pic,
left), the building famous for melting
parts of cars parked in front of it at 20
Fenchurch Street, London EC3M 3BY.
The tower was designed by New York
based, Uruguayan starchitect Rafael
Viñoly; check out the venue and see its
famous sub-tropical rooftop gardens.
Our diploma course, conducted as a series of evening
lectures at the London School of Economics, continues to
attract a varied crowd including complete beginners, private
The Society of Technical Analysts: www.sta-org.uk
3
investors and representatives from investment funds as well
as central and corporate banks. Looking at the profile of our
lecturers, I’m not at all surprised that they’re popular. And as
one speaker noted: “The best thing, from a lecturer’s point of
view, is the mix between newbies and those professionally
trading in financial markets. The students gel well and help
each other out in a friendly environment, asking intelligent
questions and challenging us teachers.”
Just look what this year’s Bronwen Wood memorial prize
winner Aldo Lagrutta has to say: “For the past 25 years I have
been dedicated to the study of the Elliott Wave Principle;
engaging in it is a daily lesson in humility. Undertaking the
path of STA certification is enough to give one pause. I live in
Germany and had to travel every week to London to receive
the training. Having obtained my certification made it all
worthwhile; the Bronwen Wood Prize is a surprising and
rewarding bonus.”
As it’s the society’s 50th birthday, we’ve decided on a big
bash - a ticketed event on the evening of Thursday 7 June,
courtesy of Sadiq Khan’s City Hall on the South Bank by
Tower Bridge. There will be drinks, canapés, networking and
live entertainment no less! I can assure you, this is not one
to miss.
And finally, I am not forgetting the International Federation
of Technical Analysts’ annual meeting which this year will
be held in Kuala Lumpur, Malaysia. A delegation was over in
London late last year sketching details of what looks to be an
interesting schedule in a fascinating country. Diarise, if you
will, 26-28 October 2018. www.ifta.org
Readers, I do hope you enjoy this issue.
 FOREWORD
6

IT’S OUR BIRTHDAY!

Save the date and be
part of the celebrations!

In 2018 the STA will celebrate its 50th anniversary. This golden landmark gives us the opportunity to look back at all we
have achieved since our inauguration and to look forward to building on our success together.

We’re already excited about celebrating with you on 7 June 2018 at the spectacular London Living Rooms - City Hall’s venue
with a view - and as part of our pre-event planning we’d like to offer you an exclusive member’s offer.

Tickets cost £50 and are for two people, so bring your partner. Non-members are also welcome to join in the celebrations, so
please do share details of the event with your network.

Don’t forget to put the date in the diary. This is one party you won’t want to miss!

Click here to book now!

London Living Rooms - City Hall


NEWS
The 30th annual IFTA conference
The 30th annual IFTA conference
was hosted by the Italian Society
of Technical Analysis (SIAT) in the
heart of Milan at the stunning Gallia
hotel. It had a packed agenda spread
over three and a half days with more
than 40 speakers giving insights into
technical analysis.
The title of the conference “Sailing
to the future” accurately caught the
mood of the event with a number of
the talks covering Bitcoin, block chain,
artificial intelligence and systematic/
algo trading. There were of course
renowned speakers giving great
talks on more traditional technical
approaches such as John Bollinger,
Robert Prechter and Perry Kaufman
to name but a few. John shared a
personal history of technical analysis
focusing on the contributions of
the individuals that he found most
useful in his investment process.
Bob gave a talk on “Linear vs Fractal
Extrapolation” in which he examined
people’s natural tendency to
extrapolate social trends linearly. As
an alternative, he offers extrapolation
based on a fractal model of social
change. The former method derives
The Society of Technical Analysts: www.sta-org.uk
7
from a paradigm of mechanics,
the latter from the paradigm of
socionomics. Perry’s talk was titled:
“Two Trading Systems with a Twist”.
There are countless ways to profit in
the market, and Perry demonstrated
two new methods that teach and
reinforce basic investment principles.
The Leonardo da Vinci science and
technology museum was the location
not only for the kick-off drinks but also
a fabulous gala dinner event. A rather
unusual restaurant, Blue Note, was the
venue on the second evening where
the chef (who confessed to being an
economist) managed to make fresh
pasta while a DJ was on stage at the
same time.
All in all it was a great event with plenty
of networking, meeting old friends and
making new contacts. The event baton
has now passed over to the Malaysian
society and I’m looking forward to their
conference in Kuala Lumpur for IFTA
2018.
 NEWS
8

Photographs from the 2017

Annual Dinner on Wednesday
20 September at the
National Liberal Club.
 The Society of Technical Analysts: www.sta-org.uk

NEWS
9
 NEWS
10
The new STA Home Study Course
It is truly a delight to be able to say
that, at long last, the new edition of
the STA’s proprietary Home Study
Course© (HSC) is now available. To
make this happen, much time has
been spent, and a Herculean effort
made by some very dedicated STA
Luise Kliem FSTA
STA Chief Examiner and HSC Editor members, and so we are extremely
pleased that this complex project
has now been completed. We have
also been very encouraged by the
hugely positive feedback we received
when our Chairman Axel Rudolph
presented the new HSC ‘prototype’
to our colleagues at the October 2017
IFTA conference in Milan.
Our LSE autumn and spring courses
remain immensely popular and for
some students there is simply no
substitute for the immediacy that
face-to-face sessions with lecturers
can provide. They also enjoy the
stimulating classroom atmosphere
that these courses give them. But for
others, the convenience of learning
at their own pace, or of not having to
travel, makes e-learning with the HSC
the preferred option. With the first HSC
already very popular, both in the UK
and overseas, this new STA course is
likely to spark considerable interest.
The first version of the Home Study
Course© (launched in 2009 and
updated as necessary) was a great
success, with examiners seeing very
impressive Diploma pass rates – at
least equalling those achieved by
other students, and on occasion even
surpassing them. But time came to
reflect more precisely the ever-growing
interest in a wider field of topics such
as TA-based money management
techniques and behavioural finance,
as well as an enlarged IFTA syllabus.
There was also a need to make
delivery as flexible as possible.
So now this exceptional technical
analysis e-learning course has
been considerably expanded and is
website based, although remains fully
downloadable. It may be used online
or offline on PC, Mac, iPad or Android
machines.
Course structure
The new edition of the course, which
covers both the Part 1 and the Part 2
Diploma exam syllabi, offers 15 subject
teaching units written specifically for it
by leading market technicians.
The units are presented using text and,
of course, a good deal of graphical
information. In total, the 15 units
contain more than 350 images and
close to 100,000 words, all of which
suggests a rather mighty tome.
However, the information is presented
in ‘digestible’ sections!
 The Society of Technical Analysts: www.sta-org.uk

NEWS
11

For further information visit ‘Browse Courses’ on the STA website.

Each unit includes exercises to self-test
understanding and progress. These
exercises provide access to a store of
multiple choice questions and answers
in ‘Exam builder’, thus offering the
additional benefit of practice in the
Part 1 exam ‘MCQ’ format. In addition,
a short trial exam is available, to give
students some practical experience of
‘how the exam works’. At the end of the
course, students will further benefit
from an exam preparation module,
with particular attention here paid to
the Part 2 exam. There is also access to
past Part 2 exam papers.
Each unit is introduced by a video
résumé and contains an animated
focus chart with voiceover. The face
in the videos and the voice on the
animated chart voiceovers are those
of Dominic Frisby. He was our choice
because, as a financial writer, actor
and voiceover artist, he has exactly the
right (and rather unusual) combination
of knowledge and presentational skills
for this project. He is, incidentally, also
a highly original comedian. That latter
skill was not required on this occasion,
although it was, of course, greatly
appreciated by those who attended
the STA Dinner in 2013, at which he was
our guest speaker!
Our authors
Many of the highly respected
contributors to the first version of
HSC are still represented, having
revised and updated their original
work. The foremost authority on
point and figure charting, Jeremy
du Plessis, has again contributed a
brilliant module on that topic, and
much-praised units on candlestick
charts (Adam Sorab), Dow (Michael
Smyrk), moving averages (George
MacLean), indicators (Elizabeth Miller)
and cycles (John Cameron) still form
a core part of the HSC. Replacement
units, with particular focus on practical
application, have been written on
Gann Theory (George MacLean),
Market Profile® (Dan Gramza) and the
Elliott Wave Principle (Murray Gunn).
Additional units, not available in
the first HSC, cover Ichimoku (David
Linton), market psychology, trading
plans and money management
(Julian McCree), managing risk
and constructing a quantitative
trading system (Malcolm Pryor) and
behavioural finance (Steven Goldstein).
As chief examiner, I made some
additions to the original foundation,
chart types and candle units to arrive
at full coverage of both the Part 1 and
the Part 2 exam syllabi. I also provided
an additional ‘exam prep’ module.
This offers guidance on the multiple-
choice Part 1 exam and detailed advice
on Part 2: what examiners look for,
time management, chart annotation
and advice on the different ways of
structuring the answer to the crucial
Question 1. An additional download,
on general technical analysis report
writing, was provided by Anne Whitby.
Her advice will be particularly useful
at the post-Diploma stage for those
aiming to publish professional reports,
although much of what she says
will also help with the report writing
aspect of Question 1.

Authors Profiles

John Cameron FSTA

John is a Fellow of the STA and a former STA Board Member. His long career in technical analysis and teaching has included
a pivotal role in setting up the STA’s education programme and for more than a decade he held the position of Head of
Education and Chief Examiner. John continues to be involved in the STA Diploma marking process.

Jeremy du Plessis BComm BEng (Hons) FSTA

Jeremy, whose company Indexia Research produced one of the first PC-based charting systems, is a Fellow of the STA. He is
an acclaimed designer of technical analysis software (he designed the award winning Updata software), a leading authority
on point and figure charting and the author of ‘The definitive Guide to Point and Figure’ and ‘21st Century Point and Figure’.
He teaches regularly on the STA Diploma course.

Steven Goldstein MBA

Steven is a performance coach and organisational development consultant specialising in financial market risk businesses.
Prior to his current career he worked for more than 20 years as a rates and FX trader, holding senior trading positions at
American Express Bank, Commerzbank and Credit Suisse. Steven teaches behavioural finance on the STA Diploma course.

Daniel Gramza BSc Eng MBA

Daniel is President of Gramza Capital Management, Inc. He is a trader, consultant, advisor to hedge funds, developer of
equity and derivative securities and co-inventor of two issued security patents. He has authored numerous publications and
develops and presents courses on essential mental techniques for traders, behavioural Japanese candle analysis, Market
Profile®, technical analysis, options and option trading strategies.
 NEWS For further information visit ‘Browse Courses’ on the STA website.
12

Murray Gunn MA (Hons) MSTA

Murray is an independent trader who also contributes analysis to Elliott Wave International’s www.elliottwave.com and
www.deflation.com. He was previously Head of Technical Analysis at HSBC and a fund manager and trader for the Abu Dhabi
Investment Authority and Standard Life Investments. A published author in technical analysis, he has served on the Board of
the STA and teaches on the STA Diploma course.

Luise Kliem BA (Hons) FSTA

Luise is a Fellow of the STA. Her 20-year City career included commodity broking and the positions of Senior Technical
Analyst (Director of Global Securities Research & Economics) at Merrill Lynch and Head of Technical Analysis at Commerzbank
Securities. Since 2001 she has taken on consultancies, working with the Credit Suisse TA team for several years. She has taught
on the STA Diploma course, has been an examiner for 10 years and has held the position of STA Chief Examiner since 2013.

David Linton BSc Eng MFTA

David is founder and CEO of Updata, and a well-known commentator on the technical analysis of financial markets. He is a
member of AAPTA (American Association of Professional Technical Analysts) and holds IFTA’s MFTA designation. David is the
author of ‘Cloud Charts – Trading Success with the Ichimoku Technique’ and teaches Ichimoku on the STA Diploma course.

George MacLean BSc MSTA

Before taking up a position as training consultant at Linedata Services, George spent 12 years at Standard and Poor’s MMS,
where he was a director of European technical analysis. He holds IFTA’s MFTA designation and is the author of the book
‘Fibonacci and Gann Applications in Financial Markets’. George teaches Gann theory on the STA Diploma Course.

Elizabeth Miller BA MSc MSTA

Elizabeth has been a commodities research manager at Mars Inc. since 2007, providing applied macro and behavioural
economic insights for the ‘raws’ procurement teams. She previously held senior technical analyst positions at Redtower
Asset Management, Deutsche Bank, Bank of America and MMS International. She has been a lecturer on the STA Diploma
Course and an examiner for the STA Diploma and IFTA CFTe II examinations.

Julian McCree BSc (Hons) MSTA

Julian is an energy trading and investment professional with 20 years’ experience in a complex risk environment. He is
derivatives manager at Genesis Energy (Auckland, New Zealand). Previously Julian was senior portfolio manager at Infinity
Capital (London), senior proprietary trader at Erste Bank (London and Vienna) and a proprietary trader at Manro Haydan.

Malcolm Pryor MA (Oxon) MSTA

Malcolm is a private trader and investor, a trading coach and also the author of several books on trading. His book ‘The
Financial Spread Betting Handbook’ is a best seller and is now in its third edition. He holds the rank of Premier Grand Master
at bridge. Malcolm has been teaching the risk and trading systems session on the STA Diploma Course for several years.

Michael Smyrk FSTA

Michael is a Fellow of the STA. Now working as a consultant, he began to use chart analysis when trading in commodity
markets in 1965, and has been expanding his technical analysis horizons ever since. Many years of involvement in technical
analysis education have included managing the MFTA programme for IFTA, teaching on the STA Diploma course and working
as examiner both for IFTA and the STA. He continues to be involved in the STA Diploma marking process.

Adam Sorab BSc FSTA

Adam, a Fellow of the STA, has been working in financial markets since 1984. He spent 13 years as Head of Technical Research
at CQS and is now a Partner and Head of Investor Relations & Sales at Lodbrok Capital LLP. He is also an independent member
of the BUPA pension fund investment committee. He was Chairman of the STA from 1998 to 2008, during which time he was
the driving force behind the first STA Home Study Course. He was also President of IFTA from 2010-13.

Anne Whitby BA (Hons) FSTA

Anne, a Fellow of the STA, has been a technical analyst for more than 40 years. She started her career at Chart Analysis Ltd,
where she was Managing Director from 1986-95, and subsequently set up a technical analysis department at 4CAST Ltd. She
has also spent some time in investment banking, working with the Credit Suisse TA team in 1999-2000. While STA Chairman
(1995-98) Anne established the first formal STA teaching courses at South Bank University.

NEWS
Our New Membership System
John Abberton
STA Administration Services
The new layout allows far
greater freedom in allocating
access to different groups of
members.
The Society of Technical Analysts: www.sta-org.uk
13
As members will be aware, 2017 saw big changes in the STA website and
membership database, and by the time this is published we expect to have
completed another stage in implementation, enabling a single log-in for the
society site.
In 2016 we were notified that the previous membership system was being phased
out by the software developers and would cease to be usable in mid-2017.
Accordingly, the society put together a team led by treasurer Simon Warren to
source a replacement. After an initial assessment by the society office, they were
able to produce a number of options for the executive committee to consider.
It was apparent the changeover presented us with an opportunity to move to a
fully integrated system, one that would allow members to have far greater control
in their interactions with the society and to enjoy a more personalised experience.
There would also be the opportunity for the directors of the society to have live
access to management information, enabling more timely decision making.
After reviewing the various options, the Society of Technical Analysts invested
in a new cloud-based membership system offered by ASI, an organisation that
specialises in software for non-profit organisations.
As we had recently invested in an excellent new website, the decision was made to
retain as much as possible of this as a ‘shop window’ for the society and to create a
new members-only site which would hold the online shop and the other items that
we wanted to provide exclusively to members.
Original ‘Shop window’ site New ‘Members only’ site
www.sta-uk.org www.members.sta-uk.org
The new layout allows far greater freedom in allocating access to different groups
of members; for example, students on the Part 2 Diploma Course are automatically
given access to a course page with videos, notes and other resources as soon as
they register for the course. Similar pages will be available for the Part 1 Course and
Home Study Course candidates.
There is a continuous programme of enhancements to the site, but elements that
we hope to add in the near future include specific pages for national chapters such
as Malaysia and Myanmar. We would also like to add pages for specific interest
groups within the society.
 NEWS
14

This exciting project has been introduced in two phases. The

first phase of the launch in August 2017 allowed members to
access their own ‘personal landing’ pages where they could
You still have the freedom to remain
join, renew their membership, view purchase history and
book events.
on the original site; however to make
any purchases or access member
Phase two is the integration of the new member system with information you will have to log in.
the member section of the STA website. Now when members
log into www.sta-uk.org they will be taken to the members’
area home page at www.members.sta-uk.org

You still have the freedom to remain on the original site; however to make any purchases or access member information you will
have to log in. So, what will you see?

The first thing will be a new login screen:

If you have not logged in here before, click on ‘I don’t know my username or password‘

This will open another small window:

Your username will always be your email address. Enter your email address and click ‘Submit’.
 The Society of Technical Analysts: www.sta-org.uk

NEWS
15

You will then be sent an email with a reset link. Click on the link and create a password. This will then be the password that
you will use for this site. If you don’t get the email, then contact the STA Office at info@sta-uk.org and we will be able to reset
it for you.

You will also find that in order to help keep your data secure, you will have to change your password every 90 days; the system
will remind you of this at the appropriate time.

Once logged in, the site opens with your personalised landing page. At the top you will find topical reminders and the menu;
further down you will see elements of your membership record and details of your participation in society activities.

There are two important areas at the top, underneath the banner. The first contains links to any committees or groups that you
are part of, and clicking on these will take you to the landing page for that group or committee. There, you will typically find
announcements and documents of interest to that group, together with a list of other members.

The second area will show any open invoices - normally the only invoice that you will see there will be your membership
renewal invoice. For all members other than those paying by Direct Debit, this will usually appear at the beginning of the month
when your subscription is due. If you pay using a credit card then please select it and follow the instructions to pay. If you pay
using PayPal it will disappear when your PayPal payment is processed. If you pay by Direct Debit it shouldn’t appear at all…
 NEWS
16

Possibly the menu item that you will use most often is ‘Book Meeting’. For security reasons, now that our meetings are at 20
Fenchurch Street (aka ‘the Walkie Talkie’), all members must both book in before attending the event and carry photo ID to
show at the entrance. Simply click on the menu item and then select ‘Register Myself’ for the appropriate meeting (or meetings).

You will notice that a question appears, asking if you wish to claim CPD for the meeting, please select yes or no and save the
response. You will still have to have your attendance validated on the night, but this will facilitate the production of reports
which you will be able to access on your home page.

As with the previous website member section, in addition to the above, you will be able access current and past Market
Technician journals from the starting point of your personalised landing page. You will also be able to watch monthly meeting
videos and IFTA webinars, join the education forum, book onto courses, access research articles plus much more. We
encourage you to log in and see exactly what we have been able to make available to you.

Finally as with all projects of this nature, despite extensive testing there will be glitches, things we have missed and things that
you think we could do better! We would be very grateful if you could send any reports of problems or suggestions for the site to
info@sta-uk.org

We can’t promise to implement all of them, but they will all be read and acknowledged.

RESEARCH
A Brief History of the Development of Median Line
Analysis, AKA Andrews Pitchfork (Part 1)
Timothy Brackett
Timothy Brackett, MSTA, CFTe, is a
technical analyst with 35 years’ financial
markets experience both on the sell and
buy side. He is currently working with a
portfolio management team monitoring
portfolio positions and searching for
investment ideas at Marketfield Asset
Management LLC. His focus includes, but
is not limited to, median line analysis,
Elliott Wave Principle and multiple time
frame price momentum work in concert
with candlestick studies. He has co-
authored The Weekly Speculator since
2004 and can be reached at
tbrackett@marketfield.com
Kyle Crystal
Kyle Crystal, CMT, CFTe, is a Principal
of Crystal Capital Advisors, LLC and
Lakeshore Technical Analysis, LLC. He
has more than 10 years of investment
experience managing long/short, long
only, global macro and commodity
strategies. He specialises in multiple
time frame analysis, market geometry
(including median line analysis), Elliott
Wave Principle, momentum analysis and
cycles. You can reach him at
kyle@crystalcapitaladvisors.com
The Society of Technical Analysts: www.sta-org.uk
17
Introduction
The authors’ intent in writing this brief paper is to draw a timeline of the evolution
of Median Line Analysis and briefly touch on those whom have contributed to the
development of what we know today as Andrews Pitchfork.
Although the technical methodology known as Median Line Analysis as we
know it today is rightly attributed to Dr Alan Andrews, it should be known that
it found its genesis hundreds of years before his time. That said, it was he who
brought it forward to the study of stocks, bonds, currencies and commodities
and his extensive analysis and studies are the basis of what is now referred to as
Andrews Pitchfork. It has been elaborated on since his passing by several students
who studied directly with him as well as by a number of learned and talented
technicians who have refined and studied it in concert with other indicators. It has
been said his disciples, who were grain traders, were responsible for attaching the
moniker Andrews Pitchfork to the technique. It is our intention to give a brief history
of the development of what we believe to be an underutilised technical tool that
belongs in every analyst’s tool box.
A Walk through Andrews Pitchfork
First, it’s worth walking through the construction of the standard Andrews
Pitchfork. Most charting software includes the Pitchfork as part of its ‘tools
package’, enabling users to effortlessly apply this tool to a price chart and we have
created this an abbreviated tutorial:
Andrews Pitchfork is a trend channel tool consisting of three lines. The first step is
to pick three points on the price chart that mark reaction highs or reaction lows.
FIGURE 1: APPLYING ANDREWS PITCHFORD TO A CHART - FIRST PICK YOUR POINTS
In Figure 1, a daily chart of Spot Gold, we have marked the start of the median line
at a reaction or swing low by point of origin, or PO. We then mark the next pivot at
the high P1 and the next pivot at the higher low at P2 and identify the midpoint of
P1 and P2.
 RESEARCH
18

The median line is drawn from the first pivot, at PO, through the midpoint of P1 and
P2, as shown in Figure 2 below.

FIGURE 2: THEN DRAW YOUR MEDIAN LINE

A “swing line” is added between the pivots and parallel lines are then projected
from P1 and P2, Figure 3. This creates the “pitchfork” that represents a price
channel.

FIGURE 3: FINALLY, ADD YOUR SWING LINE AND PARALLELS TO CREATE THE PITCHFORK

This is only meant to be a brief introduction into the construction of Andrews

Pitchfork for those unfamiliar with this technical tool. We now direct our readers
back to the original intent of this discourse, namely the history and development of
Median Line Analysis.

RESEARCH
In the Beginning...
Sir Isaac Newton (1643-1726)
In total, there are 47 scared texts that
are known of; among these, three major
Hermetic texts or doctrines have been
attributed to Hermes Trismegistus, a
syncretic combination of the Greek god
Hermes and the Egyptian god Thoth. Of
these three major teachings, we turn our
attention to The Emerald Tablet, which
may be one of the earliest alchemical
works that survives. It has been translated
numerous times by many different authors
from many cultures. Our focus is on a later
translation of the text by Sir Isaac Newton
in around 1680. In his translation, the
second verse states: “That which is below
is like that which is above, that which is
above is like yet which is below”.
Most of those who were responsible for the
Scientific Revolution studied Hermeticism.
These three wisdoms of the whole
universe – alchemy, astrology, and theurgy
– played a vital role in the advancement
of physics, astronomy, mathematics and
natural sciences. Needless to say, Newton
played an important part in the Scientific
Revolution, so much so that “Newtonian”
came to be used to describe the bodies of
knowledge that owed their existence to his
theories. It is Newton’s Third Law, one of
three laws of motion derived by Newton
from Johann Kepler’s Laws of Planetary
Motion and his studies of The Emerald
Tablet, which brings the history of median
line analysis forward. The Third Law states
that “for every action, there is an equal but
opposite reaction”.
1 George Benner, Benner’s Prophecies of Future Ups and Downs in Prices (Cincinnati: Robert Clarke & Co., 1879).
2 Henry Hall, How Money is made in Security Investments (New York: The De Vinne Press, 1907).
Roger Ward Babson (1875-1967)
Roger Babson was born in Gloucester,
Massachusetts on 6 July 1875. His father
was Nathaniel Babson, a dry-goods
merchant in the city; and his mother was
Nellie Sterns, whose mother owned a
millinery store. His was a typical childhood
of that period, although he relates he was
an unruly child who suffered whippings
at the hand of his teacher, as did most
children who ‘acted up’ during school. The
first statistics that Babson compiled were
of that early age: the record of thrashings
that various boys and girls received during
the school year. His score was forty-seven.
This was a dubious start, but a start
nonetheless to a renowned career as a
statistician, bond trader, businessman,
economist and writer which spanned
decades and created a legacy and position
of notoriety in the history of financial
markets.
Babson founded Babson’s Statistical
Organization after receiving his training
as an engineer from 1895-98 at the
Massachusetts Institute of Technology.
Here, he studied under professor of
engineering, George F. Swain, with whom
he forged a long-standing friendship.
It is their philosophical connection
that interests us, in particular their
development of the normal or median line.
The Society of Technical Analysts: www.sta-org.uk
19
George Fillmore Swain (1857-1931)
Babson was in New York selling his bond
statistical analytical research on the day of
the 1907 stock market crash and was taken
aback by the large losses accumulated
by supposedly learned and experienced
market professionals. At the time, he
had been studying Benner’s Prophecies
of Future Ups and Downs in Prices and
Hall’s How Money is Made In Security
Investments , believing that there must be
a way to forecast economic and market
changes in a more proactive and less
reactive manner.
With these two books and his own
amassed statistical data in hand he
sought out his former professor and friend
George Swain. Both concluded that, in
these two books and Babson’s collected
data, there was the basis for a technique
which, when applied properly, could
forge a new method of forecasting. It was
Professor Swain who introduced and
drew a ‘normal line’ through the historical
data in the Babson’s Composite Chart
of pig iron, corn and, hogs that would
normalise the volatile ‘zig-zagging’ index
Babson had been developing. He also
suggested that Newton’s Law of Action
and Reaction could apply to this and other
economic indicators, as it does to physics,
chemistry and astronomy. Thus was the
origin of the famous Babson charts, which
were integrated into Babson’s Statistical
Organization’s publications and later
analytically led to his famous timely
prediction of the 1929 crash, which was
published in New York Magazine.
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FIGURE 4: A NORMAL LINE CLARIFIES TRENDS IN A VOLATILE ZIG-ZAGGING INDEX

It was Babson’s further devotion to the work of Sir Isaac Newton that later prompted him to create the Gravity Research
Foundation at the suggestion of Thomas Edison. This suggestion was easily accepted, as is revealed in a later essay he wrote
called Gravity- Our Enemy Number One. He indicated that his desire to overcome gravity stemmed from the childhood
drowning of his younger sister: “She was unable to fight gravity, which came up and seized her like a dragon and bought her
to the bottom.” It was at one of Babson’s seminars years later, where he illustrated how Newton’s Third Law could be applied
to the stock market, that he met Alan Andrews. They became hardened friends and Babson taught Andrews his action and
reaction techniques. Andrews later named his median line course the Action-Reaction Course, in acknowledgement of the
teachings his mentor had shared with him.

Dr Alan Hall Andrews

Although Alan Andrew’s date of birth remains unknown, we do know he passed on in 1985. Little is known
of his personal life, wife or children. His father owned a broker/dealer where he traded for clients and his
own account and is said to have made a large amount of money in the Great Depression. Alan’s father sent
him to engineering school at Massachusetts Institute of Technology and then on to Harvard. The story
goes that, after he graduated, his father challenged him to make one million dollars in a single year while
working at his father’s brokerage firm. He did not accomplish the task in a single year, but in two years had
made one million dollars trading commodities. Andrews later became a lecturer in civil engineering at the
University of Miami in Florida.

After he retired, he returned to his roots and decided to not only manage his own investments but to teach others. He
began publishing a weekly advisory newsletter, sold by subscription, which focused on his trading methods and included
recommendations for the coming week. He also created the FFES (Foundation for Economic Stabilization) Case Study Course
applying principles of mathematical probability to the production of profits from prognostication. It detailed various median
line methods and others techniques, including fan lines which he referred to as Horns of Plenty. He sold the course for the
tidy sum of £1,500 during the 1960s and 1970s. He also held seminars and one-on-ones that were attended by New York and
Chicago pit traders. Andrews also often incorporated his student’s observations and studies into his work, careful to name
methods such at Schiff Adjusted Median Line (named after Jerome Schiff a New York trader who brought it to his attention) and
Hapogian Lines named after another one of his students Dr Hapogian.

(Part 2 will be available in the next edition of the journal.)

 The Society of Technical Analysts: www.sta-org.uk

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21

Sensemaking: a new twist on what is needed

for success in trading and investment

Example one: EURCHF and the Swiss National Bank

On 15 January 2015 the Swiss National Bank (SNB) announced that it would no
longer hold the Swiss franc at a fixed exchange rate with the euro. In a matter of
minutes, the EURCHF FX rate plummeted from close to 1.2000 to almost 0.8500, a
drop of nearly 30%.

Whilst many banks and trading desks were left severely bruised and bloodied,
the London branch of one overseas bank was left thankful that not only had they
Steven Goldstein avoided a more than EUR35m loss on one position alone, they had actually turned
in a tidy profit for the day.
Steven Goldstein is a performance
coach and organisational development
FIGURE 1: EURCHF FX RATE PLUMMETED BY NEARLY 30%
consultant specialising in working with
financial market risk businesses. Prior
to his current career, Steven worked for
more than 20 years as a rates and FX
trader, holding senior trading positions at
American Express Bank, Commerzbank
and Credit Suisse. Steven also lectures
on the subject of behavioural finance on
the STA Diploma.

Just a week earlier, one of the bank’s proprietary traders in its London office had
been running a long position of more than EUR100m spot EURCHF. The trader had
been running this position for some time and was emboldened by the comments of
the head of the SNB earlier that month, which had described the cap as “absolutely
central” to SNB policy.

The Head of FX Trading at the bank did not share the same enthusiasm as his trader
for the position. As a veteran of the markets he had always been a highly perceptive
and well-tuned-in individual who had amassed a strong record as an exceptional
taker and manager of risk. Remaining curious and open to other views was a part
of his mind-set. In light of the potential exposure to the EURCHF, he ensured he was
as informed as possible on all things Swiss franc. As he read and learned more,
something just didn’t feel right; he didn’t know why, but for him, things were not
adding up.
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22

It was rare for the Head of FX Trading to interfere with his
traders’ decisions. On this occasion however; he decided to
make an exception. A few days before the 15 January crash,
he asked the trader to exit his position, a move which was
to prove extremely insightful and which was to lead to the
avoidance of more than EUR30 million losses. There were
also other secondary benefits which were to flow from his
action. The decision alerted the head of the spot desk, who
immediately alerted his team and ensured that all his traders
knew what exposures they had to the Swiss Franc.
• Processes around money management, risk
management, position sizing and developing an
approach which reduces the impact from our natural
human biases and foibles.
• People’s ‘state of mind’, thus contributing to greater
success with less stress and anxiety and improving
performance.
• The development of better tools, systems and
instruments to support methods, process and
practices.

On 15 January, the SNB’s announcement stunned the In the above example, the actions of the Head of FX were
market. Trading desks rushed to assess their full exposure triggered by a significant exposure to threat. Exposures to
to the Swiss franc. The EURCHF pair dropped initially to threat (and missed opportunity) are significant aspects of
1.1500 before rebounding temporarily for just a few seconds. Sensemaking. Exposure, immersion (skin in the game), is a
Whilst the rest of the market sat transfixed and momentarily vital characteristic of Sensemaking. Having ‘skin in the game’
paralysed, this bank’s spot desk was prepped and responded provides the individual Sensemaker with ‘felt senses’; these
brilliantly. Its traders hit the market fast, covering their are not available to the observer of a market. This provides
exposure to all client stop orders, and ensuring they were on ‘colour’ and ‘insight’ unique to the individual, and prompts
the right side of the market. them to look beyond the ‘prima facie’ data and information
that presents itself.
What is Sensemaking?
The above example is the first of three I describe in this Example two: the asset manager who bought against his
article which highlight high quality or ‘Master’ Sensemaking. own firm's ‘sell’ recommendation
A large asset management company was concerned at the
Sensemaking is a term used to describe the physical, performance of one of the stocks in its major portfolio. The
cognitive and mental practices adopted by a person to ‘make stock already had an underweight recommendation from
meaning out of ambiguous data to help navigate situations the firm’s analysts; however the firm asked its research
characterised by high uncertainty and extreme complexity’. department to do a further analysis in light of continued poor
share price performance.
A more robust description of Sensemaking would include
mention of: abilities in relation to mental processing The analysts put together a comprehensive research
and pattern recognition. Other aspects may include; piece about the state of the company. They presented this
understanding of semantics of logic, anticipative abilities, internally to their portfolio managers. Their conclusions on
heightened self-awareness, reading and understanding of the firm were extremely negative, and the recommendation
holistic situation. Taken together these help people to detect on the stock was to downgrade it to ‘sell’ from ‘underweight’.
disconnects and anomalies, and provide an elevated ability The following week, to their surprise, one senior portfolio
to recognise and relate to what is happening around them in manager (PM) at the firm doubled his holding of the stock.
regard to context and environment. The analysts were worried that their research was not being
taken seriously!
In trading and investment roles, developing Sensemaking
capabilities can help to improve: Over the next few weeks, the price of the stock stabilised,
having fallen sharply for several months. Then, over
• How one encounters, engages and manages within the subsequent weeks, it began to claw back its losses before
heightened uncertainty and ambiguity that defines starting to rally more significantly. Within three months
risk roles. it had surged by close to 15% from the time of the ‘sell’
• How someone explores and understands their recommendation. The PM then sold the firm’s entire holdings
market(s), helping to improve the analytical process of the stock. Over the following six months, the share price
and behaviours to broaden their scope beyond facts, went into sharp decline, eventually moving well below the
figures and data to make them more rounded previous lows.
and robust.
• How someone understands themselves, where their The analyst behind this report remained puzzled. He
edge is, and helping them become more aware of their knew the PM’s actions were right in hindsight, but he
own patterns in real time. could not understand why he had ignored the ‘fact-based’
• How a person manages themselves, ensuring they are fundamental assessment of the stock. To him, the PM’s
more present and focused, more capable of living actions at the time made no sense.
with the emotional highs and lows, and how they fight
the constant battle with their own ego. Some months later the analyst had a chance to talk to the

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PM about this trade. The PM told him that he did not know
that the share price would bounce, but he felt that something
about the behaviour of the share price just did not feel right.
On the one hand the stock felt heavy; on the other, each new
negative story and additional wave of selling was having
less downside impact. In his opinion, he thought it might be
a good time to go against the market. He felt the stock was
possibly oversold and thus buying it offered a favourable
‘risk/reward’ opportunity.
Master Sensemaking
This is a great example of Master Sensemaking. This
individual was a legend of the investment world; he had
made many outstanding investments calls in a career
spanning more than 30 years. He had a ‘felt sense’ of what
was happening in the market on stocks he was exposed to.
This ‘felt sense’ could not be represented in data, numbers,
fundamentals, but it provided him with ‘colour’ on the
market.
‘Embracing of Uncertainty’
Another aspect implicit in Sensemaking, is the ‘embracing of
uncertainty’. When one ‘embraces uncertainty’ one accepts
that they ‘don’t know’, they accept ‘being wrong’ as a strong
possibility, a necessary evil on the path to success.
‘Not knowing’ and yet still acting is challenging. But in
both of these examples, and as will be seen in the next
one, the individuals involved stated that they did not know
what was going to happen next, but they still acted. They
were comfortable living with that decision, and with the
consequence that they might be wrong. Tough as this
‘mindset’ is, it is also enormously empowering. Accepting
the possibility or potential of failure upfront can help remove
much of the ‘self-judgment’ that comes with the post-trade
or post-execution analysis people engage in. It makes it
easier to contextualise an action. In addition, one is more
likely to factor in the possibility of failure into all aspects of
planning, position-sizing and risk-management.
For Sensemakers, ‘not knowing’ and ‘failure’ are just parts
of the landscape, rather than any sort of existential threat.
Failure is accepted as the price of success. Sensemakers
would never allow themselves to be fooled by phrases
such as ‘failure is not to be tolerated’. It is very much to be
tolerated, within a certain context; call it ‘informed failure’.
It is worth noting that the PM above is famed for making such
calls. He accepts that, while some of them turn out wrong,
the aggregate is what matters, and indeed his aggregate
returns have been extraordinary. Without the willingness to
accept failure as a possibility, and the factoring in of failure
in to the pre-execution analysis, he probably would not have
taken many of the trades of the type described above.
Sensemaking is an ‘Attitude and State of Mind’
Sensemaking is as much about how one ‘is’, as what they do.
Most people I come across have the ability, knowledge and
The Society of Technical Analysts: www.sta-org.uk
23
competence ‘to do’; however, it is how people ‘are’ or how
they are able to ‘be’ that distinguishes the ‘great’ from the
merely ‘good’.
Sensemaking also requires a ‘state of presence’ or being
‘present’. Being ‘present’ allows people to move to levels
of performance which are out of the reach of most. These
people can bring the best of themselves to their work on
a regular basis. This ‘state of presence’ cannot be turned
‘on and off’ like a tap; it is something these people have
deliberately worked on over many years through trial, error,
success, failure and reflection.
As a performance coach and organisation development
practitioner, a major part of my work is helping people,
teams and businesses within financial market environments
develop their ‘Sensemaking’ abilities. Many of the best
traders I work with are outstanding Sensemakers; it still
surprises me when they come to me for coaching, though it
shouldn’t really. A characteristic of great Sensemakers is the
desire to always grow, get better and stay ahead of the field.
Example three: the Bund Trade
My third example relates to a more short-term trading
approach with a small twist at the end.
It occurred 1:30pm on a Friday in May 2007 as the latest US
GDP number was released. Twice in recent weeks, the trader
had entered the market on the short side in Bunds; twice he
had stopped himself out. He still favoured Bunds to thrust
lower on what he felt was potentially a very favourable ‘risk/
reward’ set-up. However at this time he had no position.
The data release was significantly weaker than expected;
this did no favours for the trader’s view. Bunds were closely
correlated to moves in the US 10-year note, which jumped
in response to the data. However, the move higher quickly
ran out of steam and soon started to reverse. The trader
noted that the initial jump higher was less spectacular than
the disappointing data warranted, and 10 minutes after the
release, all the gains were erased. This now had the trader’s
attention!
The market continued to tick lower, at first just gradually,
but then it started to gather speed. The trader re-checked
the economic data release; there was nothing ambiguous
within it, and it was weak data. He also noted that the trading
volume was far larger on the selling than the buying. This was
not ‘normal’ price action and, instinctively, he started selling
Bunds. He did not know why, but things felt different this
time. Maybe this was the move he had been anticipating.
By the day’s end he was fully short his 1200 lot limit and that
afternoon’s trading had fully erased most of the negative
USD600,000 PnL for the year with which he had started the
day.
Over the next couple of weeks, this trade continued to move
sharply in his favour, soon getting close to the objective he
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24

FIGURE 2: THE BUND TRADE MOVED SHARPLY IN HIS FAVOUR were ultimately proved right, but in a
different timeframe. Equally, the US
GDP data release in the third example
was a sign of sharply slowing economy.
Further data confirmed this in the
months ahead, and within weeks of the
data release, US and European bonds
commenced a multi-year bear move.

In all three examples, the individuals

picked up on disconnects between
the first-hand reading of the data and
price action which provided great
risk-reward opportunities. It may
have made no sense to the external
observer; however, the traders had
‘colour’ on the market, and feelings
which could not be captured in a
rational reading of the fundamental
data.

Sensemaking, the Key to

Extraordinary Performance
In these examples the individuals
set for this move. He booked his profit on this trade, close to USD3m million overall. concerned had no idea what was going
to happen next, nor were they aware of
Sensemaking is far more than intuition. why they felt they were taking the right
It would be a mistake to confuse Sensemaking with intuition, the ability to action. However, they trusted their
understand something instinctively and without the need for conscious reasoning. intuitions and instincts acted upon
Sensemaking informs intuition. When we are engaged in Sensemaking practices, them, and were willing to accept the
we are increasingly open to picking up non-conscious signals. consequences of being wrong.

Sensemaking takes us beyond the data and facts. Financial markets confound These stories are not isolated. I work
many people because they so often do not conform to models or expectations. In with many outstanding traders,
all three examples above, the markets confounded conventional wisdom of how investment professionals, salespeople
they should perform in reaction to the events which preceded the decisions. and leaders in the industry. As
shown by many similar examples in
Imagine, if in each of these examples a commentator was expected to make other fields of performance, great
assertions on likely market direction based off the first-hand data which preceded performance seems to defy logic and
each decision, as they do on financial TV programmes. In the first example, a reality. In a world characterised as
response to the SNB stating their continued support for the euro peg from a mechanised, ordered and digitalised,
commentator, would have been likely to state this as providing strong underlying we increasingly overlook the human
support for the EURCHF. In response to the sell recommendation from the asset factors which play such a major part in
management firm’s analysts, a commentator would have remarked that this should the processes needed
be significantly bearish for the stock in question. In the third example, the obvious for success.
response on the GDP data would have been to stress this as bullish for bonds.
I have not named the individuals or
Sensemaking gives the chance to tap into a much deeper well of knowledge, to their firms in the first two, as their
reveal hidden signals, to gain deeper understanding, to be able to intuit. This, companies require extreme levels of
of course, is not easy; not every choice will be right, which is why ‘embracing confidentiality. However, revealing
uncertainty’ can be so challenging. Many of my clients do not like having to explain the little twist I alluded to earlier, I can
their decisions to others; most people want sound explanations based on hard tell you that in the third example the
data. trader was me, from a time when I was
working at American Express Bank in
This also proves challenging for analysts. They must make recommendations London.
based on their models and first-hand data. They do not have the luxury of making
assumptions based on feelings, felt insights, hidden knowledge and market colour.
Interestingly, the conclusions reached by the asset management firm’s analysts

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Extending the Frontiers of Technical Analysis:
the application of W. D. Gann’s forecasting
method to the currency markets
James Smithson
James Smithson is an investor and
trader based in London.
You can contact James on
Smithsonjames@hotmail.com
The Society of Technical Analysts: www.sta-org.uk
25
Introduction
William Delbert Gann (1878-1955) was a successful stocks and commodities trader.
He also wrote seven books and numerous short courses on how to trade. Gann’s
success as a trader was based on his forecasting method, which he developed from
his research between 1902 and 1908.
This paper examines the application of Gann’s forecasting method to the currency
markets. The evidence suggests that Gann never traded currencies. I examine
the reason for this omission, and why his forecasting method can nonetheless be
applied to the currency markets today, and also look at the potential practical
problems.
Why did Gann not Trade the Currency Markets?
Gann does not mention currency trading in his books and courses, nor in his
various advisory services or in his personal trading records. Thus it is reasonable
to assume that he never traded them. To identify the reason for this, it is first
necessary to examine his method.
Cycles of time form the basis of the technique (Smithson 2016) and Gann referred to
cycles throughout his writings, including:
“Time is the most important factor in determining market movements because the
future is a repetition of the past and each market movement is working out time in
relation to some previous time cycle.” (Gann 1946, p4) and
“My experience has taught me that nothing can stop the trend as long as the time
cycle shows up-trend. Nothing can stop its decline as long as the time cycle shows
down. Stocks can and do go up on bad news and go down on good news.” (Gann
1949, p3)
He summarised his forecasting method in the following statement:
“In making my calculations on the stock market, or any future event, I get the past
history and find out what cycle we are in and then predict the curve for the future,
which is a repetition of past market movements.” (Gann 1927, p76)
Thus the method essentially has three stages:
1) Acquire a detailed price history of the financial instrument;
2) Analyse that price history to identify the underlying cycles driving the
financial instrument; and
3) Forecast the future prices of that financial instrument from the future
progression of those underlying cycles.
Therefore a necessary condition for the application of the method is that prices
should fluctuate freely in accordance with underlying cycles, both historically (ie
during the period of the price history) and into the future. However, the evidence
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26
suggests that between 1908 (when Gann completed the
creation of his forecasting method) and 1955 (when he died),
this condition was not generally present in the currency
markets. To be specific, the major currencies typically did not
fluctuate freely.
A detailed history of currency controls from 1908 to 1955 is
beyond the scope of this paper; but here is a summary of the
exchange-rate regimes of the leading industrial countries
during that period which indicates the constraints and
controls on currency prices:
• 1908-14: Fixed-exchange-rate gold standard
• 1914-18: First World War: gold standard suspended and
capital controls
• 1919-27: Interwar managed-floating-exchange-rate period
• 1928-31: The major currencies returned to gold standard
by 1928 and from 1931 began leaving gold standard in
response to the Great Depression
• 1931-39: Interwar managed-floating-exchange-rate period
• 1939-45: Second World War
• 1945-55: Bretton Woods system of fixed exchange-rates.
In summary, it would appear that Gann never traded
currencies because, from 1908-55, the major currencies were
typically prevented from fluctuating freely, nullifying his
forecasting method.
Application to the Currency Markets Today
It is more than 60 years since Gann died and the Bretton
Woods system of fixed exchange-rates that was in force for
the last decade of his life eventually collapsed in 1971-73.
Today the major currencies (by which I mean the Australian
dollar, British pound, Canadian dollar, euro, Japanese yen,
Swiss franc and US dollar) ostensibly float freely. They are
monitored by their respective central banks, all of which are
mandated to maintain economic stability and hence can
intervene in currency markets when they deem necessary.
For example, the Swiss central bank pegged the Swiss franc
to the euro between September 2011 and January 2015.
The key question, which I shall now attempt to answer, is:
Can Gann’s forecasting method be applied to the currency
markets today?
As stated above, the first stage is to acquire a detailed price
history. I decided to examine first the US dollar and therefore
obtained a series of daily price charts (open/high/low/close
bar charts with arithmetic price scale) of the US dollar index
(ie measured against a trade-weighted basket of currencies)
from 1988 to 2017. I selected a 30-year period because this is
long enough to include a range of market conditions. Finally,
I selected a starting-date of 1 January 1988 because that
was 15 years after the end of the Bretton Woods system of
fixed-exchange rates. I hoped that by this time the US dollar
and the other major currencies would have been fluctuating
freely in accordance with their underlying cycles.
As stated above, the second stage is to analyse the price
history to identify the underlying cycles. I found it quite
straightforward to identify the set of cycles driving the US
dollar and therefore I concluded that Gann’s forecasting
method can be applied to the currency markets today.
Unfortunately my conclusion was premature. More
specifically, when I then applied this same methodology to
the other major currencies (as stated above, the Australian
dollar, British pound, Canadian dollar, euro, Japanese
yen and Swiss franc) I was unable to identify clearly any
underlying cycles. This absence of clear cycles prevailed
whether I analysed a currency index or the various currency
pairs.
My initial thought was that I must have been mistaken in my
analysis of the US dollar, that proponents of the Efficient
Markets Hypothesis were correct after all and that market
prices are essentially random, making looking for underlying
cycles in a price history a naïve and futile activity. However, I
rapidly came to my senses, remembering that I had already
successfully applied Gann’s forecasting method to a range of
stocks and commodities.
I therefore hypothesised that currencies present a specific
problem: individual stocks and commodities are essentially
single financial instruments that are measured in a
currency that is relatively stable compared with the stock
or commodity. In contrast, a currency pair is essentially
two financial instruments fluctuating simultaneously in
accordance with their underlying cycles and therefore it is
difficult to identify those cycles.
I then hypothesised that I had been able to identify the
underlying cycles of the US dollar from its index price
history because its cycles dominate those of the basket of
currencies it is measured against. In contrast, the underlying
cycles of the other major currencies are relatively evenly-
balanced. Therefore the cycles driving a particular currency
are obscured, whether one is examining a currency index or
currency pair.
I therefore concluded that in order to identify the underlying
cycles driving a particular currency it is necessary to measure
that currency in terms of a second currency, one that is
relatively inert. Consequently, I set out to find a currency
issued by a country both economically and politically very
stable and with few natural resources (eg mineral or energy
assets, whose cycles may influence its currency). The New
Zealand dollar appeared to be a suitable currency.
I then re-examined the major currencies, employing the
New Zealand dollar as the reference currency. In each case

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the underlying cycles driving that currency could finally
be clearly identified. I then re-examined the US dollar, but
measured in New Zealand dollars, and confirmed my earlier
findings regarding its underlying cycles.
I then examined a selection of minor currencies, the Brazilian
real, Indian rupee, Mexican peso, Norwegian krone, Russian
rouble, South African rand, South Korean won, Swedish
krona and Turkish lira. Once again, I employed the New
Zealand dollar as the reference currency and, in each
case, the underlying cycles driving that currency could be
identified.
I excluded some currencies from this analysis because they
are linked to others, once again nullifying Gann’s method.
These were the Chinese yuan (partially-pegged to a basket
of currencies), Danish krone (pegged to the euro), Hong Kong
dollar (allowed to trade in a range linked to the US dollar) and
Singapore dollar (stabilised against a concealed basket of
currencies).
In summary, my research encompassed the 21 most
actively-traded currencies by value, which constitute
approximately 97% of foreign exchange turnover (BIS 2016).
More specifically, the underlying cycles of 16 currencies
were identified. Four were excluded because they are linked
to other currencies and it was not possible to identify the
underlying cycles of the New Zealand dollar due to the
apparent absence of a more stable reference currency.
I then concluded that Gann’s forecasting method can be
applied to the currency markets today. However, in order to
identify the underlying cycles driving a particular currency
it is necessary to analyse the price history of that currency
measured in New Zealand dollars.
At this point I should apologise for not providing a detailed
exposition on how to identify the underlying cycles driving a
currency from a price history of that currency. I am however
continuing a practice started by Gann himself:
“Mr. Gann has refused to disclose his method at any price”
(Wyckoff 1909, p55) and “It is not my aim to explain the cause
of cycles” (Gann 1927, p78).
Potential Problems in the Practical Application of Gann’s
Forecasting Method to the Currency Markets
1) Identifying the underlying cycles that drive a currency
As discussed above, currencies present a particular
problem because a currency pair is essentially two financial
instruments fluctuating simultaneously in accordance with
their underlying cycles and therefore it is difficult to identify
the cycles driving each component. The solution, when
analysing a particular currency, is to employ the New Zealand
dollar as the reference currency. This is an effective solution
because the currency is relatively inert, apparently reflecting
The Society of Technical Analysts: www.sta-org.uk
27
“Do not expect General Motors to have a big
advance because Studebaker has already
advanced… Also consider that it has a capital
stock of fifty million shares, while Studebaker
has only 750,000 shares… It requires a much
larger buying power to move a stock with
several million shares than it does one with only
750,000.” (Gann 1923, p104)
the country’s stability and small economy (New Zealand’s
gross domestic product was ranked fifty-third in the world by
the IMF in 2016).
2) A currency ceases to act in accordance with its
underlying cycles
Gann’s forecasting method is nullified when a financial
instrument ceases to act in accordance with its underlying
cycles. The major cause of this problem in currencies is
central bank intervention. The solution is to avoid such
currencies, in the same way that Gann recommended we
avoid stocks acting similarly:
“The kind of stocks to trade in are those that are active
and those that follow the rules and a definite trend. There
are always queer-acting stocks and some stocks that don’t
follow the rules. These stocks should be left alone” (Gann
1936, p34).
3) A currency’s low sensitivity to its underlying cycles
Under Gann’s forecasting method, the price of a financial
instrument is driven by cycles. One ramification is that the
larger the amount that has been issued, the stronger the
cycles must be to drive it:
“Do not expect General Motors to have a big advance
because Studebaker has already advanced… Also consider
that it has a capital stock of fifty million shares, while
Studebaker has only 750,000 shares… It requires a much
larger buying power to move a stock with several million
shares than it does one with only 750,000.” (Gann 1923, p104)
The currency markets are some of the largest financial
markets in the world. Therefore they are particularly
susceptible, displaying a low sensitivity to their underlying
cycles and only the strongest cycles produce major moves.
One solution is to trade the so-called cryptocurrencies (eg
Bitcoin or Ethereum) as these usually have a price history
from which their underlying cycles may be identified
and used to forecast future price movements, and the
amount of issued currency is apparently strictly controlled.
Unfortunately there would also appear to be a grave risk that
in future these currencies will not act in accordance with
 RESEARCH
28

their underlying cycles due to such factors as fraud, hacking, network and infrastructure failure and regulatory intervention.

4) A breakdown in the geometry of currency markets

Although cycles are the basis of Gann’s forecasting method, he also discovered that market prices typically unfold in a coherent
way in response to these cycles and hence there is a geometry to the stock and commodity markets. For example, changes in
the rate of vibration (as measured by the slope of the trend line in prices) are not continuous but conform to a series of principal
energy levels and subshells (Smithson op. cit.).

Consequently, in his forecasting of the stock and commodity markets, Gann analysed the underlying cycles and the resultant
market geometry. However, in the currency markets this geometry typically breaks down because of the simultaneous price
fluctuations of each component of a currency pair.

Although the New Zealand dollar is sufficiently stable as a reference currency to enable the identification of the underlying
cycles driving a particular currency, it is usually not sufficiently stable to enable the use of market geometry as a supplementary
forecasting method. Therefore, unlike stock and commodity markets, when analysing currency markets, we can only rely on the
underlying cycles.

Conclusion
The Efficient Markets Hypothesis is currently the dominant paradigm in the field of investment. In summary, it postulates that
price movements are essentially random in highly-developed or “efficient” markets.

W. D. Gann’s forecasting method is the direct antithesis of the Efficient Markets Hypothesis. In summary, it postulates that the
price history of a financial instrument can be analysed to identify the underlying cycles driving the financial instrument; these
can then be used to forecast future prices.

A necessary condition for the application of Gann’s forecasting method is that a financial instrument should fluctuate freely.
This condition was not generally present in the currency markets during Gann’s lifetime and therefore he never traded
currencies. However, it is generally present in the currency markets today and therefore his forecasting method can now be
applied. The exception are pegged currencies, which do not fluctuate freely.

A key problem in application is identifying the cycles driving a particular currency. The solution is to employ the New Zealand
dollar as the reference currency. Another problem is when a currency ceases for a period of time to act in accordance with
its underlying cycles, the usual cause being central bank intervention. A third problem is a currency’s low sensitivity to its
underlying cycles, the usual cause of which is the very large amount of currency that has been issued. A final problem is the
breakdown in market geometry, the usual causes of which are the simultaneous price fluctuations of each component of a
currency pair.

Since Gann’s forecasting method can be applied to any financial instrument that fluctuates freely in accordance with its
underlying cycles, and where a detailed price history is available to enable identification of these cycles, the investment
universe today essentially includes all stocks, all commodities and all currencies that are not pegged to other currencies.

References
• Bank for International Settlements (BIS). 2016. “Foreign Exchange Turnover in April 2016.” BIS Triennial Central Bank Survey.
• Gann, William D. 1923. Truth Of The Stock Tape. Lambert-Gann Publishing Co.
• Gann, William D. 1927. The Tunnel Thru The Air Or Looking Back From 1940. Lambert-Gann Publishing Co.
• Gann, William D. 1936. New Stock Trend Detector. Lambert-Gann Publishing Co.
• Gann, William D. 1946. Forecasting Grains By Time Cycles (included in W. D. Gann Commodities Course)
• Gann, William D. 1949. 45 Years In Wall Street. Lambert-Gann Publishing Co.
• Smithson, James. 2016 “Rediscovering W. D. Gann’s Method Of Forecasting The Financial Markets.” Market Technician, issue 80.
• Wyckoff, Richard D. 1909. “William D. Gann: An Operator Whose Science And Ability Place Him In The Front Rank.” The Ticker And Investment Digest.
 The Society of Technical Analysts: www.sta-org.uk

29

Did you know?

Did you know that we run an education forum? This is to help people pass the STA exam.
It is run by Rajan Dhall. Below is some of the feedback we have been getting:

“Hi Raj, thought I’d let you know I passed the exam. I was sure I would
be resitting it but somehow managed to get 82%. Thanks for looking over
the reports I emailed you, it really helped knowing I was on the right
path. Thanks for all your help.”

Sam Bloxham, private investor.

 ANALYST FOCUS
30
Head and Shoulders above: Trevor Neil
Trevor Neil MSTA
Trevor is a Director at RRG Research.
As well as teaching technical
analysis, he is an Accredited Training
Provider for the Chartered Institute
for Securities and Investment
and runs courses for them in
behavioural finance, Blockchain and
technical analysis. He has presented
the popular Trevor Neils’s Technical
Analysis Surgery, a monthly webinar
sponsored by Thomson Reuters,
for more than six years. He has
been involved in the world’s only
institutional technical analysis
awards since they started 10 years
ago and is proud to host the annual
Technical Analyst Magazine Awards.
The PC had a big effect on
technical analysis. Our tools
moved from being pencil,
graph paper, ruler and
compass to Apple II...
At the age of 18, armed with my ‘A’ Levels, I was lucky enough to get a job with
the esteemed firm Ralli Merrill Lynch, Piece, Fenner and Smith. They sent me
straight to New York on a two-month induction programme, Fast Track Trader,
where we learned technical analysis, point and figure charts in particular. In
those days, if you were a trader, you obviously needed to be good at charting.
My very first job was representing the firm on the floor of the London Coffee
Exchange. I moved on to trade other soft commodity futures and from there to the
offices as a broker looking after trade hedging customers.
At that time a revolution took place in technical analysis - the PC was invented.
Many of you may not be aware there was a time when people and even companies
didn’t own computers; they had big mechanical adding machines. Only NASA and
universities had computers. But suddenly everyone had access to the low-cost PC
- we’ve recently witnessed a similar revolution with the arrival of the smartphone
and now nearly everyone around the world has one or even two.
The PC had a big effect on technical analysis. Our tools moved from being pencil,
graph paper, ruler and compass to Apple II. Most of us used the Apple because it
had a really good charting package called Compu-Trac. This programme (long gone
now) has an important legacy in the history of technical analysis; the owners ran
an annual conference in the US where people presented their new theories and
ideas and, if accepted by their peers at the conference, these ideas were added as a
tool in the programme. I attended four of these conferences and saw Wells Wilder,
Gerald Appel, George Lane and many others present their indicators. I remember
chatting to a nervous young man who was about to do his presentation about his
new book, The Elliott Wave Theory.
I will skip quickly through a few decades now. When LIFFE opened, many of us
commodity traders moved to financial futures and FX and eventually to equity
derivatives. My own career took the path into fund management and into
systematic trading. At this time I was involved in the establishment of technical
analysis as a profession, being on the board that changed an association into the
Society of Technical Analysts, and I was involved in the creation and acceptance of
the exam qualification that is now a global franchise. I served on the board under
four Chairmen and I am proud to have been a member from the start and enjoy
attending meetings (and the excellent dinners) even today.
My career moved forward and I ran a technically driven systematic fund that was
stock exchange quoted called Helix Fund for a bank. I had a brief period again
on the floor of LIFFE in the Bund pit before being offered a great job as Head of
Technical Analysis at Bloomberg which I loved, but I missed the markets too much
and decided to have one more go.
With a colleague, we raised the capital in 2003 to form a hedge fund trading
using the work of Tom Demark. Seeded mainly by a large South African insurance
company, we ran the Isivuno Fund (Zulu for harvest) from there and, after moving
to South Africa, I lived in Johannesburg and Cape Town. In 2006 I wanted to return
to the UK and sold my share of the fund to my partner.
 The Society of Technical Analysts: www.sta-org.uk

ANALYST FOCUS
31

I have some wonderful clients including stock

exchanges and even central banks. I am
particularly appreciated in the energy and
power market and by hedge funds.

Since then I have run a small fund trading systematically

using technical analysis. I started BETA Group and teach
technical analysis skills to institutional traders, portfolio
managers, analysts and hedgers worldwide.

I have some wonderful clients including stock exchanges

and even central banks. I am particularly appreciated in
the energy and power market and by hedge funds. The
former look to use the timing aspects of technical analysis
to reduce and manage risk, the latter to get exposure to risk.
For almost 10 years I have presented a popular free monthly
webinar sponsored by Thomson Reuters, Trevor Neil’s
Technical Analysis Surgery.

I am one of those fortunate people who love their job. I am

proud to be able to call myself a Professional Technical
Analyst. I never want to retire because my hobby is technical
analysis. I have made many friends through the STA and at
the IFTA conferences I have attended and spoken and of
course, my clients.

Technical analysis has been very good to me in my

40+ year career.
 ANALYST FOCUS
32
The 2016 Bronwen Wood winner describes his
experience of the STA course: Marco Meola
What is your background and how did you get into the
financial industry?
My decision to go to university and then to join the financial
industry was mainly to avoid my family’s business of Italian
restaurants! I wanted to stand on my own two feet. After
studying Economics and Management at Oxford University, I
was selected for an internship at UBS in 2010 and then joined
the Foreign Exchange Institutional Sales team full time in
2011. I do sometimes regret this choice when trying to spot
trendlines rather than perfecting pasta sauces with my father
and brother!
What is your role at UBS Investment Bank?
Foreign Exchange Institutional Sales involves interacting
with a mixture of hedge funds, insurance companies and
pension funds, providing a range of services including trade
execution, content production and account management.
These three quite varied functions, combined with the fact
that the team looks at a very broad range of markets and
financial instruments, makes the role especially interesting.
When did you first hear about technical analysis?
I was introduced to technical analysis by Mike Bichan,
now global head of FX sales at UBS, when I joined UBS.
Alongside fundamental analysis, he used technicals to gain
a better understanding of market sentiment and I found this
approach very useful. I also spent some time with Richard
Adcock, then the in-house technical analyst at UBS, who
explained the key indicators and methods he looks at,
further catalysing my interest.
What made you decide to take the STA diploma course?
I heard about the diploma from a number of colleagues
and clients. In particular I thought it would help me better
understand market sentiment and timing, as well as adding
an element of objectivity to how I think about markets. I was
 The Society of Technical Analysts: www.sta-org.uk

ANALYST FOCUS
33

also attracted to the flexibility and adaptability of technical
analysis, to different time frames, levels of risk appetite,
and asset classes. I wanted to use both technical and
fundamental analysis; it doesn’t have to be one or the other.
How did you find the course and what was your
favourite part?
The course was a fantastic way to get to grips with a range of
technical analysis tools. Part one is a foundation course that
gives you a solid grounding. Part two looks at topics in more
detail, each week meeting a new expert in their field who
explains a new technique. I enjoyed this part the most. You’re
not told what to do; rather, you are introduced to a broad
range of techniques and you then decide which of them to
apply and in what combination.
How was the exam?
The part one exam is multiple choice; it requires a good
amount of work but is generally manageable. Part two is a lot
more difficult but also a lot more rewarding and applicable to
my job. You get three hours to write a technical report across
time frames, as well as answering one long and two short
essay questions. It’s less about the rigid right and wrong
answers of part one. In part two, very different answers could
both be of a high standard. It’s about applying the principles
and techniques that you’ve learned in the way you see fit -
providing justification where relevant and reaching evidenced
conclusions. The most important thing in my opinion to
succeed in the exam is time management, both in terms of
planning your revision, and planning how you will use your
limited time in the exam itself. The course instructors are very
good at explaining this and the exam preparation classes are
incredibly useful. But ultimately you need to ensure you plan
and do as much practice as possible under exam conditions.
peers. In addition, clients, colleagues and traders are often
interested in support and resistance levels. Overall, I have
found ideas that combine technical and fundamental
analysis generate the most interest. Since doing the course,
the range of indicators I use has increased, and the number
of people who value my technical opinion is notably higher.
What do you like about technical analysis and what areas
do you concentrate on?
I primarily like that it keeps you honest. Human beings
have a selection bias; if you are bullish an asset you tend
to see the evidence that supports that claim and ignore
that which contests it. Technical analysis can give you a
framework, a point of reference, to keep yourself in check.
I use a combination of traditional trend lines and patterns,
which can be a bit subjective but I find useful, combined
with candle formations, MACD and stochastics to do this.
The other thing that attracts me to technical analysis is the
idea that market action discounts everything - including
fundamentals, political risk and investor psychology.
Would you recommend the diploma course and exam to
anyone thinking about taking it?
Absolutely. Quite simply there is no better way to become
versed in such a range of technical analysis tools.

Did it meet your expectations? And why?

Overall the course beat my expectations. I didn’t expect to
have such a range of teachers covering so many different
techniques. Furthermore, the course strikes a very good
balance between the academic discussions around the
advantages and disadvantages of technical analysis, and the
practical application of whether the outlook for an asset is
bullish or bearish and what might change your mind.

How do you now use technical analysis in your day-to day-

work? Has this changed since taking the exam?
I use technical analysis for a combination of purely
technical trade ideas, and to support or refute ideas based
on fundamental analysis – both my own and those of my
 BOOK REVIEW
34
Book Club by Nicole Elliott
Nicole cross-examines some of today’s leading experts to
put together the definitive reading list for those keen to
expand their technical analysis wisdom.
Were you given a book or three for Christmas? If they’re
rubbish, I have an idea!
At least twice a year, the media machine feels the need
to tell you which books to buy. For yourself, to keep you
entertained over the summer holidays, and for your nearest
and dearest (who you haven’t seen in a year) at Christmas.
Journalists, who don’t know you from Adam, feel compelled
to make lists of suggestions. Why on earth would I listen
to them? They don’t know what I like and have an even
foggier idea of who my friends are. Why can’t we have
chefs reviewing recipe books, musicians pushing poetry, or
policemen covering crime fiction? Now that might be fun!
As my friend the supreme-court judge who, like me, has
to read an awful lot for work says: “Reading for pleasure
becomes a little more difficult every year. Or are we more
demanding?” Yes, demand better and (preferably) more
concise. Don’t even open the unwanted Xmas gift; don’t think
of thumbing through it. Write the requisite thank you note
(email will do for a present where so little time and effort
were involved) and see if you can wangle an exchange. Off to
the book store, online retailer, or EBay with a lame excuse.
For those of you who are technical analysts, or want to learn
more about the subject, I have some books in mind which
hopefully will cover all ability levels. But I wouldn’t be so
bold - or so industrious - as to pick the mix myself. Oh no! I
have strong-armed the best in the business to give me their
suggestions. I’ve enlisted committee members of the UK’s
Society of Technical Analysts and some of the biggest names
into proffering a couple of suggestions apiece.
Starting with STA chairman Axel Rudolph a
multi-lingual German banker and an efficient
chap his reply was first in my inbox, bagging
a book that many other also did suggest:
‘Reminiscences of a Stock Operator’, the
story of Jesse Livermore by Edwin Lefèvre.
Published in 1923 my money market broker
gave me a copy (for Christmas!) 30 years ago and I’ve re-read
it several times. Axel says: “it has many insights into trading,
life, and psychology which are as relevant today as they
were when the book was written”. Another MSTA pointed
out that its other advantage is that it’s a small, short book
and therefore easy to pack. Axel’s second choice is ‘Trader
Vic - Methods of a Wall Street Master’ by Victor Sperandeo
because “his set-ups, such as a false breakout, can still be
profitably traded today”.
Adam Sorab, a previous STA chairman and
global multi asset hedge fund manager said:
“Personally, my first recommendation would
be ‘Behavioural Investing: A Practitioners
Guide to Applying Behavioural Finance’ by
James Montier. The reason is that while
many books do a good job of teaching TA
techniques, few books do such a good job of teaching one
about the very real neurological and psychological barriers
to investment success. James’s book brings together a
lot of solid academic research and pulls the lid on many
investment myths. I think it’s essential reading for anyone
who is ever going to try and make money by investing in
markets. If I had to give a second recommendation it would
be Thomas Cleary’s translation of ‘Art of War’ by Sun Tzu. It’s
a very accessible version of this essential ancient Chinese
military strategy text. Art of War is a 2500 year old piece of
writing that still has a huge amount to teach us about coping
with conflict and opportunity in today’s world”.
John Cameron, who is responsible for much of the syllabus
and exam format of the STA Diploma Course likes these
books: ‘Getting started in Technical Analysis’ by Jack D.

BOOK REVIEW
Schwager where “his purpose is to avoid a text
book approach and show TA as essentially
practical, something he achieves brilliantly”;
he penned the best-selling ‘Market Wizard’
series. John’s second choice is also
‘Trader Vic’ because “it’s a fascinating
biographical, forthright, entertaining and
enjoyable read” which as the foreword claims ‘this book [is]
valuable to everyone, regardless of their level of interest or
expertise in the stock or commodity markets’.
Luise Kliem, who currently sets the STA
exams and developed the Home Study
modules, recommends ‘Marber on Markets’
by City legend and my guru Brian Marber
saying: “It’s very informative with a practical
approach that all investors (particularly
private investors) will welcome – and it’s so
utterly irreverent and entertaining that I forgive him for pooh-
poohing Fibonacci.” Her number two is ‘Candlestick Charts’
by Clive Lambert because it does what it says on the tin:
written in a “clear, informal and engaging style that quickly
gives the reader a grasp of what’s important”.
John Douce, STA librarian at our collection in
the Barbican, focused on texts for newcomers
because, as Woody Allen said, “stockbrokers
invest your money until it’s all gone”. ‘The
Intelligent Investor’ by Ben Graham (1894-
1976) was first published in 1950 and the
fourth edition has a preface by Warren Buffet,
footnotes by Jason Zweig. His second choice is the output of
industry veteran Martin Pring, one of his many books being
‘Technical Analysis Explained’.
Enthusiastic head of marketing and
consummate professional chartist Karen
Jones’ first suggestion is John Murphy’s
‘Technical Analysis of the Financial Markets’.
“For a beginner’s book I think it’s hard to beat.
When I first started out this was my reference
book of choice.” Considered by many a
dictionary of TA, it runs to many hundreds of pages with lots
of chart examples. Note: it should be tackled in small doses.
“Because I have always been fascinated by Fibonacci I also
enjoyed ‘Fibonacci Trading: How to Master the Time and
Price Advantage’ by Carolyn Boroden,” Karen says. I would
also suggest an offbeat book, ‘The Secret Code’ by Priya
Hemenway, subtitled ‘The mysterious formula that rules art,
nature, and science’; venturing into the occult here.
Treasurer Simon Warren, ex-fund manager at health insurer
Bupa proffered these little gems: ‘Motley Fool: Make your
Child a Millionaire’ “because it’s small and light to travel with,
The Society of Technical Analysts: www.sta-org.uk
35
it’s very cheap and it explains to the novice
investor that you have to get saving early
because compounding is key. It also shows
people they should be doing important things
like having a will”. He adds another two:
‘The Trading Athlete’ by sports psychologist
Shane Murphy and trader Doug Hirschhorn
and ‘Market Wizards’ (again) which is available as an
audiobook. Handy! Indeed, podcasts are currently more
popular than video interviews.
Mark Tennyson-d’Eyncourt, who is
every bit as suave a fellow as the name
suggests, said, “I have a nasty feeling that
my recommendations don’t fit your criteria,
but here goes: ‘Charters on Charting’ by
David Charters but it might be out of print.”
Great! Then ‘The Great Crash of 1929’ by J.
K. Galbraith, my copy of which became almost mandatory
reading in the dealing room in 2007 and 2008. He also
suggests Adam Smith’s ‘Money Game’ and ‘Beginners Please’,
a 1975 edition of extracts from the Investors Chronicle
“where the TA chapter also acts as a primer and where the
charts show the major tops in 1972 and the declines through
to 1974. A real bear market! This should be required reading
for younger analysts”. I’ve read a later version and it’s brill,
complete with original Investors Chronicle material from
David Fuller.
Charles Newsome, Divisional Director at
Investec Wealth & Investment Ltd (who
moonlights as vice chairman of the STA) was
succinct. ‘Steve Jobs’ by Walter Isaacson. “OK,
it’s a biography but I think it’s a must read
and gives an insight into this brilliant man.
‘The Outsiders’ by William Thorndyke which
is the story of eight unconventional outsiders who thought
differently about capital allocation”.
Clive Lambert, whose candlestick book was
chosen earlier, now pops up in his guise as
part of the STA marketing team. His third
choice (he was asked for two but is a generous
man) is ‘Extraordinary Popular Delusions and
the Madness of Crowds’ by Charles Mackay.
“It amazes me how often investors forget
about bubbles; this is a cracking read that serves as a great
reminder to anyone who is thinking about piling into Bitcoin
right now... for example!”
David Watts, trading systems consultant likes ‘Secrets for
Profiting in Bull and Bear Markets’ by Stan Weinstein, “the
most lucid book on the use of moving averages”. His other
book is ‘Technical Analysis of Stock Market Profits: A Course
 BOOK REVIEW
36

in Forecasting’ by Richard Schabacker which UK’s leading publisher of books on finance,

he deems was the first real Bible of TA. I
agree, adding that my primer was Edwards &
McGee’s ‘Technical Analysis of Stock Trends’,
which interestingly focuses on commodity
futures markets as these were then at the
forefront of investment thinking.
Youthful hedge fund manager Tom Hicks
says he’d “have to go for ‘Reminiscences”
(yes, another plug for this delightful little
book) and a toe-curling ‘Ichimoku Charts: An
Introduction to Ichimoku Kinko Clouds’ by
Nicole Elliott. Yours truly’s oeuvre “was the
book that got me into trading using Ichimoku
techniques” and which Luise liked for its writing style.
Lastly, company secretary and fellow of the society,
veteran Anne Whitby says: “I’m afraid I have no books
to recommend. I’ve only ever read one (because I had to
proof read it) by Ellie Gifford and it’s now out of print”. This
reminds me of one of my fellow bank traders who insisted on
working from home saying he wanted to keep away from the
distracting chatter of other dealers.
investment, and trading. He casts his vote
for ‘A Beginners Guide to Charting Financial
Markets’ by Michal Kahn, and says: “This book
gives the basics; it covers only the nuts and
bolts of chart analysis leaving the whizz-
bang stuff well alone.” Another choice is Eoin
Treacy’s ‘Crowd Money’ where “at its heart is the application
of the insights into crowd psychology. The author’s approach
to measuring the rhythm of the market has been the secret
weapon of alpha generators for decades”.
I’ve kept the best ‘till last, a hero of mine, the
man who single-handedly revived Elliott Wave
Theory, the maverick who likes combining all
sorts of areas of thinking - a Renaissance man
- Robert Prechter, who also likes ‘Popular
Delusions’. His other choice is too cheeky to
be true: penned by his very own hand and
published in 2017, ‘The Socionomic Theory of Finance’.
Piecing together psychology, herding tendencies, mood,
linear extrapolation bubbles, scepticism and economics, this
is an 813 page brain teaser. “I wouldn’t call it beach fare, but
I think it’s fun!” He donated a copy for the STA library; thanks
Bob!

For those interested in commodity markets,

I’ve roped in ex-head of risk management at
United Biscuits, Brenda Sullivan. She says:
‘Economics of Futures Trading’ by Thomas
Hieronymus is “a classic. This book makes
accessible the relationship between futures
and the cash or physical markets. These
concepts underpin all asset classes and price movements”.
Her other gem, Peter Steidlmayer’s ‘New Market Discoveries’
(one of which was the Market Profile technique). “This
method put order into markets before we had digitalisation
and this method of arranging data links to geometry and the
statistical concept of standard deviations.”

Book reviewer, technical analyst and private

trader Simon Gray likes Alexander Elder’s
‘The New Trading for a Living’ where “its
strengths are market psychology, risk control
and account management”. As an alternative
to Schabacker there’s John Burford’s
‘Tramline Trading - A Practical Guide to Swing
Trading with Tramlines, Elliott Wave and Fibonacci Levels’. A
mouthful, published by Harriman House in 2014.

This segues neatly on to Stephen Eckett, who set up

Harriman House in the early 1990s and which is now the

BOOK REVIEW
Trading with Ichimoku
Karen Péloille (2017)
Harriman House
Book Review by John Cameron FSTA
Do you struggle with
chart analysis?
Fortunately, I had the benefit
of STA Revision Day training
where a version of the
Problem Solving Approach
(Analysis, Synthesis, and
Conclusion) was expounded.
Those three stages
evolved into Observation,
Interpretation, and
Evaluation and then became
“what you see in the chart,
what it means, and what is
the probable future outcome
resulting from your interpreted observations. Suddenly I had
a methodology that has a neat logical flow, and that presents
evidence, explains it and combines it into a compelling case.
Karen Péloille has found a system that fulfils her trading
needs. Indeed, she states, in bold: “This system is Ichimoku
Kinko Hyo, which allows traders to understand market
movements with one single glance.” In fact, that contention
is achievable but requires dedicated study, accumulated
experience and a deep appreciation of technical aspects.
It won’t come instantaneously. The author, a respected
university academic in econometrics and trading educator
in both France and USA, does bring rigour and illumination
to present knowledge. What is more, and important, is
the author also incorporates trading psychology, risk
management and money management into the process.
The structure of the book, as you might expect from an
academic, is well organised. There are four main parts:
“Ichimoku theory”, “Ichimoku in Practise”, “Ichimoku and
Other Indicators” and “The Art of Disciplined Trading”. Each
is tidily further divided into separate numbered and titled
The Society of Technical Analysts: www.sta-org.uk
37
sections as set out on the Contents page. There is no index.
Japanese terms are used throughout the book. Where the
author wants to emphasise salient points they are printed
in bold. However some sections can be obscure and it takes
time and effort to unravel them. For instance in the very first
section of the first part:
“Ichimoku Kinko Hyo is a Japanese term meaning
‘equilibrium at a glance’. The most important thing to
remember with this indicator is that it depicts market
balance. The five dynamic lines that make up Ichimoku
exemplify price equilibrium points and may be used in
markets to signal potential ruptures of such equilibrium.”
Even if you are used to the language of fundamental or
technical analysis it might take you a moment to realise that
there is a pattern of five lines that describe the current state
of the market. When that five line pattern changes it could
indicate a changed situation.
The section ends by correctly stating that Ichimoku is a
trend indicator. It is constructed from moving averages but
not the type used in western markets. All the lines, with the
exception of the Chikou or lagging line, are determined by
calculating a median as opposed to a mean. Both are forms
of central tendency or average. The advantage of a median
is that it discounts extremes or outliers. The difference
between the two types is well illustrated by a clear chart
example. Do not think that wherever the text refers to an
“average” it denotes the more commonly understood mean!
The rest of the first part, “Ichimoku Theory”, is
comprehensive and is particularly clear and well-illustrated
if you are not familiar with the technique. Indeed I commend
the final section, “3 Analysis”. It starts by stressing the
necessity of multi time frame analysis. Working through
the examples, all of which are well illustrated will teach you
 BOOK REVIEW
38

much and, an added benefit, you will become accustomed to the author’s approach. Finally, in the last section, the author’s
methodology is set out. It is a rigorous routine and sensible and consistent.
The second part of the book, “Ichimoku in Practise”, is demanding and engaging. As earlier mentioned, it is unusual as it looks
at more than technical aspects and covers important broader issues.

The first section, “4 trading” distinguishes the differences between technical analysts and technical traders. Initially it defines
the needs, the different requirements, of both TA users. It goes on to compare how both are fulfilled. The author provides logical
and credible arguments. You may disagree in some detail but it is sound, sensible and well thought out.

It is followed by basic candle interpretation. Again, it is entirely sound and, even if you know it already it is a useful reminder.

Next comes trading procedure and case studies. Some 98 pages of them! It does take time to study them especially as there is
nearly a chart per page. It does grind it home a bit: I know because I found it a hack but then I learnt much. There is one issue of
which I am not convinced. The author categorically states that: “A stop that is not based on technical is doomed to failure.” (The
author’s emphasis).

This second part is the heart of the book. It is useful and sound.

In complete contrast, I find the next part, “Ichimoku and Other Indicators”, is unconvincing at best. I think of indicators as
separate from moving averages; the latter are for trends and cycles and indicators for oscillators based on momentum, volume
or volatility. The author points out that Ichimoku is a complete system and in her view western moving averages and oscillators
are unnecessary, that the only western techniques of any merit are trend lines or Andrews pitchfork which itself is considered a
form of trend line. I have the impression that the author does not see any benefit from applying trend lines, that Ichimoku does
a better job anyway.

There is a section on Fibonacci but I expect most of you know about that.

The final part, “4. The Art of Disciplined Trading” is commended. It and part 2 are genuinely useful. The whole book could
help if you are contemplating whether trading is for you.
 The Society of Technical Analysts: www.sta-org.uk

THE SOCIETY OF TECHNICAL ANALYSTS

39

Benefits of STA membership

The STA holds 11 monthly meetings in As a service to our members, many of The Society of Technical Analysts and
the City of London, including a summer whom are unable to attend all our monthly the Chartered Institute for Securities &
and Christmas party where canapés and meetings, we have been making videos of Investment (CISI) have formed a partnership
refreshments are served. meeting presentations for several years. to work together on areas of mutual interest
for our respective memberships.
Key benefits Key benefits
• Chance to hear talks by leading • Never miss the latest meeting. Key benefits
practitioners • Browse our extensive video archive of CISI examination exemptions for STA
• Networking previous meetings. Diploma Part 1 and 2 holders. MSTAs with
• CPD (Continuous Professional three+ years’ experience can become full
Development) members (MCSI).

The STA has been running educational Student members have access to an Endorsed by the Chartered Institute for
courses on technical analysis for 25 years. education forum which is available in the Securities & Investment (CISI), members of
member’s area of the website. the STA are entitled to receive continuing
Key benefits professional development points (CPD) for
• Courses are taught by leading authorities Key benefits their attendance at monthly meetings and
in their field such as authors, highly Members can ask questions on technical taught course lectures.
regarded professionals and Fellows. analysis in the Technical Analysis Forum
• The STA also offers a Home Study Course which a course lecturer, author or Fellow will
for self-study. answer. Key benefits
• Remain compliant.
• Be informed of all new industry
developments.

The STA ”Market Technician” journal is
published online twice a year.
Key benefits
Members receive the latest issue of the
“Market Technician” via e-mail.
They are also able to access an archive of
past editions in the member’s area of the
website. Technical analysts from all over the
world contribute to the STA journal.
The STA has an extensive library of classic STA members benefit from significant
technical analysis texts. There are over discounts on technical analysis books,
1000 books in the collection. It is held at the magazines and software.
Barbican Library with a smaller selection
available at the City Library, a reference Key benefits
library in London. As a member you can now STA members currently enjoy discounts from:
browse which titles are available on-line. • Your Trading Edge
• The Technical Analyst Magazine
Key benefits • MT Predictor
Members are encouraged to suggest new • CQG
titles for the STA book collection and, where • Tradermade and the Global Investor
possible, these are acquired for the library. bookshop.
The complete listing of books held can be
downloaded in Excel format from within the
member’s area.
 THE SOCIETY OF TECHNICAL ANALYSTS
40

STA Calendar 2018 More information about the STA events can be found here.

Monday 5 March Tuesday 13 March Tuesday 17 April

10.00am 6.30pm 6.30pm

Stay Ahead Training Centre CISI CISI. Eddie Tofpik, ADM Investor
STA Diploma Part 1 Exam Tom Rubython Services International Ltd

See pg.6
for more
info

Thursday 19 April Tuesday 8 May Thursday 7 June

1.00pm 6.30pm 6.30pm

London School of Economics CISI London’s Living Room
STA Diploma Part 2 Exam TBC 50th Anniversary Party

Monday 2 July Tuesday 10 July Tuesday 11 September

10.00am 6.30pm 6.30pm

Stay Ahead Training Centre CISI CISI
STA Diploma Part 1 Exam MiFID II Research Panel Update TBC

Thursday 11 October Tuesday 13 November Tuesday 11 December

6.30pm 6.30pm 6.30pm

CISI CISI CISI
TBC TBC Christmas Party
 The Society of Technical Analysts: www.sta-org.uk

THE SOCIETY OF TECHNICAL ANALYSTS

41

STA education: the LSE courses, and the Diploma

in Technical Analysis
The Education Channel - Monthly meetings videos are available to members here.

January 2018 Market Outlook Panel Panel discussion

December 2017 AGM & Christmas Party No video recording

November 2017 Pedro Fernandes, Chris Deavin, Tom Hicks, Tim Parker MiFID II panel discussion

October 2017 Dr Dmytro Bondar, Dr Nazri Khan Detecting market cycles using inverse-logic spectral analysis
Malaysian Society Visit

September 2017 Trevor Neil The VIX pop trading method - defined and tested

July 2017 Summer Party & Awards Ceremony No video recording

June 2017 Zaheer Anwari Ignore the noise of the crash and profit from this bull run

May 2017 Rajan Dhall Finding value across asset classes using volume profile

April 2017 Paul McLaren Volume at price: Not all prices are equal!

March 2017 Shaun Downey Trading time: using the fourth dimension to create a third
spatial visualisation from a two dimensional image

February 2017 Rolf Wetzer Cycles in trading, empirical mode decomposition

January 2017 Stephanie Ames, Chris Clark, Zaheer Anwari Panel discussion: outlook for 2017

STA Library

The public library of the City of London at the Barbican Centre holds around 1500 books on economics, finance and investing;
this includes the STA collection. UK STA members can obtain free membership of the library and are sent the relevant form in
their membership pack. A UK-wide postal service is also available to members. If you do not have an application form to hand
and would like to join, please contact STA Administrative Services (info@sta-uk.org) and they will send you one.

More information about the STA library services can be found here.
 THE SOCIETY OF TECHNICAL ANALYSTS
42
A BRIEF HISTORY OF
THE STA DIPLOMA
Anne Whitby FSTA
Company Secretary
Anne, a Fellow of the STA, has been a
technical analyst for more than 40 years.
She started her career at Chart Analysis
Ltd, where she was Managing Director
from 1986-95, and subsequently set up a
technical analysis department at 4CAST
Ltd. She has also spent some time in
investment banking, working with the
Credit Suisse TA team in 1999-2000.
While STA Chairman (1995-98) Anne
established the first formal STA teaching
courses at South Bank University.
When Philip Gray, aided by others, initiated the process of converting the
Association of Chart and Technical Analysts into the Society of Technical
Analysts, (a company limited by guarantee), one of the aims of the new
body was to create a formal system of teaching and examining to provide
a professional qualification in the subject. Prior to this, some commercial
courses were available, notably from David Fuller of Chart Analysis Limited,
while Investment Research in Cambridge ran an annual conference focusing
on the use of TA, which over the years was addressed by every famous analyst
you could name. However, none of these offered a recognised professional
qualification.
So Philip appointed Bronwen Wood as Head of Education, charged with the task of
creating a course and an examination in Technical Analysis.
It must be said that no one who has taken the course
(now courses) and exam would remotely recognise our
earlier efforts. The ‘course’ consisted of five evenings
of lectures in one week, conducted at the offices of
GT Management, where Philip Gray was a Director.
Patently, the syllabus was somewhat shorter...and
fairly basic! The lecturers included Philip and Bronwen,
Robin Griffiths, Elli Gifford of Investment Research and
Anne Whitby of Chart Analysis. Bronwen wrote and
marked the papers, with the other lecturers as second
markers where necessary. As now, candidates were not named on their papers, but
had numbers allocated. Later the course expanded, but remained relatively short.
Then in around 1994 Michael Smyrk met Ron Giles of South Bank University, which
had achieved its university this status in 1992. Ron was keen on bringing TA into the
University and, over discussions on their shared interest in TA, the idea grew that
that the STA might run our courses there. The then Chairman, Anne Whitby, and
Michael, held a number of discussions with other SBU lecturers and the Finance
Professor and the deal was struck. Now all that was needed was a longer course
and more lecturers to present it to students.
 The Society of Technical Analysts: www.sta-org.uk

THE SOCIETY OF TECHNICAL ANALYSTS

43

By this time Bronwen was on her way to work for ADIA in

Abu Dhabi, so John Cameron and Clive Hale, who had jointly
taken on the education function, set to designing a course
to be held weekly over some eight weeks – and persuading
people to teach on it. All was in place, but very shortly before
the first lecture of the first course was due, Clive found
himself unable to participate. Very fortunately for the STA,
John agreed to carry the whole burden of both managing the
course and doing a number of the lectures, so it all started
as planned. John also continued in this role and that of
Examiner until he retired in around 2012.

Eventually Ron Giles left South Bank and it was necessary

Did you know?
to move our operations, with the result that the courses
have been held at the LSE for some years now. Meanwhile,
subsequent Heads of Education on the Board, Axel Rudolph Did you know that we run an education forum?
and Deborah Owen, have continued to expand all our This is to help people pass the STA exam.
educational operations, both those connected with the It is run by Rajan Dhall. Below is some of the
Diploma in Technical Analysis and also those in association feedback we have been getting:
with other educational establishments, notably QMUL and
Kings College in London. Luise Kliem has for some years “Hi Raj, thought I’d let you know I
been Chief Examiner and Course Director, responsible for passed the exam. I was sure I would
the whole of the Diploma programme under the Board’s be resitting it but somehow managed
direction. The number of lecturers has also increased over to get 82%. Thanks for looking over
the years, so we can continue with our strategy of providing the reports I emailed you, it really
true experts to lecture in the various subjects covered by the helped knowing I was on the right
courses.
path. Thanks for all your help.”
A furthermore recent development has been to offer two
courses a year, one introductory and one leading to the MSTA Sam Bloxham, private investor.
designation. This was planned to cover the fact that some
potential Diploma students had very little basic knowledge,
as the Part 2 Diploma course was not long enough to start
from basics and go right through to Diploma standard.
The provision of a Part 1 more basic course also allows
for students who may not wish to take their knowledge to
Diploma level, but do wish to gain some knowledge of the
subject, which can be proved.

So from small but ambitious beginnings, the STA Diploma

course has expanded greatly over the past 22 years or so.
Meanwhile our examination, which was one of the first of
its kind, is now recognised worldwide as a high standard
qualification.
 THE SOCIETY OF TECHNICAL ANALYSTS
44

Balance professional development and your

personal life with our new Home Study Course©
In February 2018 the STA launched the new Home Study
Course, HSC 2©. This is an exciting upgrade to the hugely
successful HSC© which has been a number of years in
development. The STA’s aim was simple - to give you the
best product on the technical analysis market, not just
in course content or the number of experts involved in
its development, but also with the administrative and
continuous student support you receive.
For the past few years we have been tirelessly working on
an updated HSC 2© product and all the hard work and
commitment has resulted in the launch of an industry-
leading home study course that is already being recognised
as head and shoulders above anything else available.
The new HSC 2© course costs £1,195.00 and can be
purchased by clicking here. This new price reflects the major
enhancements as well as the additional and expanded
content.
The STA Home Study Course© (HSC) is perfect for students
who wish to learn at their own pace rather than in a
classroom, due to either time or geographical constraints.
Anyone who is not able to, or does not wish to, travel to
London to attend the STA Diploma Part 1 and 2 courses will
find the HSC an excellent alternative.
Although website based, it is fully downloadable and may be
used online or offline by PC, Mac, iPad or Android machines.

What’s new in HSC 2?: For more details click here or contact the STA office on
+44 (0) 207 125 0038 or info@sta-uk.org
• How one encounters, engages and manages within the
heightened uncertainty and ambiguity that defines
risk roles. New industry experts involved in
development
• More interactive
• Improved Q&A
• 40% more units created to cover increased range of
topics (IFTA syllabus compliant)
• Gann unit now more practical and user friendly;
additional Elliott Wave theory coverage
• Interactive questions for each unit using Exambuilder
STA Diploma Part 1 exam software
• New modules: Risk & Trading systems, Behavioural
Finance, Ichimoku Kinko Yyo
• Additional techniques taught: Renko, Kagi, Three-line
break charts and much more
• More revision and exam preparation
 45

Congratulations to the latest

STA Diploma MSTAs

Distinction
Justin Gray

Pass
Norhasima Binti Haron Chin Mai Ng
Noor Asmah Binti Bokhari Gagandip Pannu
Julian Broke Evans Mei Ching Amanda Quek
Henry Croft Martin Rea
George Eddell Georgia Solomou
Teddy Golding Vladimiros Spanos
Khiam Huat Gooi Áine Stafford
Matthew Gosling Joseph Stein
Ahmad Helmi Abdul Halim Stelios Stylianou
Sylvester Jonny Petros Theodoulou
Arjun Lakhanpal Wan Nur Salina Binti Wan Ibrahim
David Madden
 THE SOCIETY OF TECHNICAL ANALYSTS
46

The STA Executive Committee

Axel Rudolph Charles Newsome Karen Jones Mark Tennyson d’Eyncourt

BSc (Hons) MSc FSTA MCSI MSTA FCSI BSc (Hons) FSTA FSTA
Chairman of the STA Vice Chairman Head of Marketing Programmes

Guido Riolo David Watts Anne Whitby Clive Lambert

BSc MBA MSTA BSc (Hons) CEng MICE MIWEM MSTA BA (Hons) FSTA MSTA MCSI
Marketing / Journal Systems and Website Specialist Company Secretary Marketing

Leona Gomez-Lopez Tom Hicks Richard Adcock Nick Kennedy

MBA ACCA MSTA MEng MSTA MSCI MSTA BA (Hons) MSTA
Treasurer Head of Programmes Journal Systems and Website Specialist

Please keep the articles coming in

The success of the Journal depends on its authors, and we would like to thank all
those who have supported us with their high standard of work. The aim is to make
the Journal a valuable showcase for members’ research - as well as to inform and
entertain readers.

Ben Tyler
BA (Econ) FCA MSTA ACSI
Finance
Keep up to date with the conversation by joining us on:
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