Essential Technical Analysis will give the new student of technical analysis a good overview of both classical chart patterns and a myriad of technical indicators, but so will many other texts. What sets this volume apart is that it presents the subject in the context of real-world trading situations, not idealized well-chosen examples.
The goal of this book is, like my CNBC technical analysis columns that came before it, to present technical analysis tools and insights that can help you make more informed, and more profitable decisions relating to trading and investing. I utilize the U.S. stock market for all examples. I also discuss some indicators and aspects that are particular to the stock market.
A major related purpose of the information and stories I present is that a process is begun whereby you start to look at markets in a different way, to see beyond the usual way that market information is presented to you or understood by you. I emphasize again my hope that you will be able to profit from this information.
A major consideration is to discuss and demonstrate what I consider to be the more useful tools and methods from technical analysis—for example, demonstrating how to locate stocks that offer the best hope of gain at the right time, at lowest risk, and with an effective exit strategy. There are less used technical tools and analysis techniques that could be described but that might be marginal for most people, in terms of improving trading and investment decisions.
A second orientation I have is to discuss some of the pitfalls to improved trading and investing decisions, such as your attitude toward the market—is it gambling or is it profitable investing or trading that you can master? How much time will you invest in it and how much perseverance will you maintain?
I find that a person’s emotional temperament, work habits, discipline, and ability to see ahead (foresight) are as, or sometimes more, important as mastery of some of the more complex areas of technical analysis. Time spent and perseverance in understanding the most basic use of charts and technical indicators are more important to most market participants than exhaustive study of every aspect of this field.
And there is a great tendency among people to think that complex ideas and techniques must be the way to approach the markets, which after all, are complex mechanisms. This is wrong, as simple is better in my experience, and I am not the only one saying this—many top advisors and money managers base their decisions on a relatively simple set of criteria.
- Introduction and Rationale to the Technical Approach
- Our Trading or Investing Game Plan
- Charles Dow and the Underlying Principles of Market Behavior
- Price and Volume Basics: Chart Types and Price Scales
- Concepts of Trend and Retracements and Constructing Trendlines
- Recognition and Analysis of Chart Patterns
- Technical Indicators
- Confirmation and Divergence
- Specialized Forms of Analysis and Trading
- Putting It All Together