The Charts Know It All
Chart Patterns, Trading, And Dan Zanger
by Matt Blackman
Trader Dan Zanger of Chartpattern.com first hit the media spotlight in December 2000 when he was featured in a Fortune article. The article, entitled "My Stocks Are Up 10,000%!" discussed how he had turned $11,000 into $18 million in 18 months (with a return of 164,000%), an unofficial world record for trading stocks (with the tax receipts to prove it). Not mentioned in the article was that in 23 months, the total grew to $42 million.
Also not mentioned except in passing was much detail about Zanger's trading techniques, indicators, and philosophies or an outline of his typical trading day. He uses chart patterns to find high-volatility ("frisky") stocks. The article piqued the interest of many readers about the art of technical analysis and provided insight into what is possible for those with the skill and dedication. How is he doing more than two years later? How does he trade and what motivates him? STOCKS & COMMODITIES contributor Matt Blackman caught up with Dan Zanger by telephone on April 23, 2003, at his home in Florida.
I use absolutely no indicators whatsoever.
I simply reply on chart patterns, price, and volume.
What indicators do you use? Do you use momentum or other indicators with your chart patterns?
I use absolutely no indicators whatsoever. I simply rely on chart patterns, price, and volume. Who has time to look at so many indicators when you're scrolling through 400 stocks a night? I look at daily bars intensely and dissect them and then add in the volume bars to come up with sort of a pressure factor that tells me what the stock wants to do next and when it wants to do it. Is it ready now or does it need more time? That's the job at hand every day.
You use price volume and chart patterns and that's it?
That's 100% of what I use.
How have you found trading chart patterns over the last few years during the current bear market?
Like most people in the market today, I learned about trading with the major secular bull market that started in 1982. All my learning was to the upside and knowing when to step aside when the charts predicted a correction was about to start. It took at least seven months for me to get the hang of the charts for a bear market, and other items took over two years. Even with the chart knowledge I learned, news stories and interest rate cuts would and could and did rocket stocks right out of the bear patterns. It was brutal, but a great learning experience.
What trading tools have you found to be most useful?
As far as trading tools are concerned, I like AIQ's proprietary moving average trading bands. When a stock breaks out of a base or pattern and if it blows through the upper trading band, that tells me it's a very strong stock. That also tells me I need to sell half or all of my position on the second or third day above the trading band. AIQ bands employ moving averages over a long time. No other bands replicate them that I know of. Bollinger Bands come close in some ways but not others.
...Continued in the August 2003 issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the August 2003 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2003,Technical Analysis, Inc.
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