Michael Harris’ Stock Trading Techniques Based on Price Patterns will be a welcome antidote for those who have always considered chart-based trading to be poisoned by subjectivity.

In this book, Harris outlines approaches for identifying, testing and trading price patterns mechanically. There are no vaguely defined patterns or ambiguous concepts. Each pattern the author discusses is explained precisely and mathematically, and he provides the tools for traders to define their own patterns the same way.

The book paints a realistic picture of the difficulties of designing a consistently winning trading strategy. Harris stresses the need to understand the logic behind price patterns — you have to know how and why something works to have any hope of trading it successfully. He illustrates the process of moving from visual identification of patterns to mathematical description and historical testing (and outlines some proprietary pattern-searching techniques).

Throughout, Harris provides specific guidelines rather than general principles. He points out that a complete set of trading rules must concretely specify where to enter, where to exit with a profit, where to exit with a loss, and which market(s) and time frame(s) should be traded. An informative chapter on money management, which includes formulas for determining how much to risk on your trades, rounds out the picture.

Harris takes issue with a few ideas surrounding price patterns and systems trading. He argues that “generic” price patterns — those that work in all markets and time periods — don’t exist. And, while he advocates the need for extensive testing before trading, he challenges the notion that mechanical trading systems remove human emotion from trading. In addition, he believes traders must use several patterns and trade a number of non-correlated markets. The book also includes programming code and back-testing results for the patterns discussed in the book.

Harris uses some unique terminology to categorize different price concepts, and the book contains a fair amount of mathematical formulae, considering it’s about chart patterns. While this may irk those accustomed to reading about patterns with cutesy names, detail and precision only come at a price. For those seriously interested in researching, testing and trading price patterns, Stock Trading Techniques is an excellent resource.