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How Markets Really Work: Quantitative Guide to Stock Market Behavior, 2nd Edition

How Markets Really Work: Quantitative Guide to Stock Market Behavior, 2nd Edition

Larry Connors, Cesar Alvarez (With), Connors Research (With)

ISBN: 978-1-118-23945-2

Feb 2012

175 pages



For years, traders and investors have been using unproven assumptions about popular patterns such as breakouts, momentum, new highs, new lows, market breadth, put/call ratios and more without knowing if there is a statistical edge.

Common wisdom holds that the stock markets are ever changing. But, as it turns out, common wisdom can be wrong. Offering a comprehensive look back at the way the markets have acted over the last two decades, How Markets Really Work: A Quantitative Guide to Stock Market Behavior, Second Edition shows that nothing has changed, that the markets behave the same way today as they have in years past, and that understanding this puts you in a prime position to profit. Written by two top financial experts and filled with charts and graphs that illustrate the market concepts they develop, the book takes a sometimes contrarian view of everything from market edges to historical volatility, and from volume to put/call ratio, giving you all that you need to truly understand how the markets function. Fully revised and updated, How Markets Really Work, Second Edition takes a level-headed, data-driven look at the markets to show how they function and how you can apply that information intelligently when making investment decisions.

Disclaimer vii

Table Explanation ix

Acknowledgments xi

CHAPTER 1 Market Edges 1

CHAPTER 2 Short-Term Highs and Short-Term Lows 7

CHAPTER 3 Higher Highs and Lower Lows 25

CHAPTER 4 Up Days in a Row versus Down Days in a Row 43

CHAPTER 5 Market Breadth 65

CHAPTER 6 Volume 83

CHAPTER 7 Large Moves 93

CHAPTER 8 New 52-Week Highs, New 52-Week Lows 105

CHAPTER 9 Put/Call Ratio 117

CHAPTER 10 Volatility Index (VIX) 127

CHAPTER 11 The Two-Period RSI Indicator 147

CHAPTER 12 Historical Volatility 157

CHAPTER 13 Creating a Sample Strategy from This Research 159

CHAPTER 14 Applying the Information in This Book 163

About the Authors 167

Index 169

""Those who want to improve their trading of the markets in the very short run would benefit from this book."" (Seeking Alpha, March 21st, 2012)
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