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Brainy's "4 Windows"
Share Market Analysis
The Details

The "4 Windows" share market analysis approach is a framework
intended for both new and experienced investors and traders
to firstly remind us of the breadth of technical analysis*,
and also to serve as a checklist to help us remember
key 
considerations for stock (and index) analysis.

Also see the 4 Windows Analysis overview...

* - Don't forget that share market price charts summarise the underlying opinions and emotions of the
market participants. Every chart tells a story. It pays to understand the stories in the price charts.
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Related Information: Technical Analysis

Overview - The "4 Windows" analysis method

Remember that the four windows that form the basis of this approach are:

Window 1 - Plain price - Trends, Support, Resistance, and Chart Patterns
The uppermost window is to remind us that it is useful to eye-ball the plain price chart, and gain a quick feel for the presence (or absence) of any price trend, any levels of support and resistance, and any chart patterns. Many successful traders and investors utilise only the concepts depicted in this window, and they ignore the other three windows.

Window 2 - Big Picture & perhaps your favourite "strategy"
The second window is to help fill out an understanding of the "big picture". This can be done in a number of ways, and may include your own preferred specific approach or favourite strategy (such as cycle analysis, Elliott Wave, or Gann).

Window 3 - Chart indicators
This window is to remind us that the subject of technical analysis includes a range of chart indicators. Some people don't use any indicators because they believe the plain price chart tells them everything. But many people believe they can be very useful.

Window 4 - Volume
The bottom window is to remind us that the consideration of volume can be important.

The upper three of the four windows can be subdivided into four smaller windows, to remind us of the different sub-topics within each section. The detail is indicated diagrammatically at right, and explained in more detail below.



The "4 Windows"
analysis approach


The
details

Window 1 - Plain price

The uppermost window actually contains four sub-views, or four window panes.

This window and it's four window panes remind us that it is useful to eye-ball the price chart, and to look at the peaks and troughs in price. If we can't immediately see the features, we can draw lines on the chart to join together any successive peaks, or successive troughs, and horizontal lines at the peaks and troughs. Then any lines that don't make sense can be deleted. The end result might be valid trend lines, levels of support and resistance, and possibly a chart pattern (like a triangle, wedge, double top, etc.).

But what sort of chart should we use? - daily, weekly, monthly?, and a line chart or candles or bars?

The first thing that is certain is to view at least two different time frames, and possibly three (because the market is like an elephant). This might be to firstly view a monthly chart over several years, then drill down to a shorter time period and view the weekly chart, and eventually view the daily chart. Remember that there might be an uptrend in one time frame, and a downtrend in another time frame.




Window 2 - Big picture and your own strategies

The second window is to point out two perhaps different things. Firstly, that sometimes there are specific tools or methods that can help to understand the big picture. Secondly, that there are some very specific approaches (like Elliott Wave or Gann analysis) that some people find very useful (for both big picture and shorter time frames). And it is most important to zoom the chart out and view the longer time frames - because the market is like an elephant.

The items mentioned here are this commentator's own favourites:

  • Coppock chart indicator (on a monthly chart) was designed to indicate turning points at market bottoms.
  • Weinstein - In his well-regarded book "Secrets for Profiting in Bull and Bear Markets", Stan Weinstein describes his strategy of viewing weekly price charts, and a 30-week Moving Average, and to consider "Stage Analysis". See more details here.
  • Candlesticks - The usefulness of studying candles, both individual candles and multi-candle patterns, should not be overlooked.
    See more details about candlesticks.
  • Your favourite - The fourth pane in this window is to remind us that we might find a specific field of study useful, so we should keep our options open. This includes the use of Elliott Wave analysis, as well as the studies and ideas of Gann.
The market is like an elephant.And don't forget - the market is like an elephant, so always look at a longer time frame as well. The extra insight can be surprising.



Window 3 - Chart indicators

The third window is all about technical analysis chart indicators. This window also has four window panes, to remind us that the vast collection of chart indicators can be grouped into four basic categories - trend indicators, momentum, volatility and volume indicators. If we are keen to use one or more indicators, then we should consider an indicator from the separate groups - not all from the one group. 

Note that some people don't use any indicators at all because they believe the plain price chart tells them everything they need to know.




Window 4 - Volume

The bottom window is to remind us that volume can be an important consideration, and that the volume pane of the price chart ought to be viewed.

Also, this bottom window actually comprises three window panes, to remind us that not only is the volume important, but for investors and traders it is also very useful to understand the value traded per day or week, and the number of trades that takes place each day or week. These can help to make sure a position size is not too large, and also to help make sure we invest in stocks with enough liquidity to enable us to sell out quickly if required.






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The information presented herein represents the opinions of the web page content owner, and
are not recommendations or endorsements of any product, method, strategy, etc.
For financial advice, a professional and licensed financial advisor should be engaged.


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Last revised: 31 July, 2015.