Technical Analysis of the Financial Markets Covering the latest developments in computer technology, technical tools, and indicators, the second edition features new material on candlestick charting, intermarket relationships, stocks and stock rotation, plus state-of-the-art examples and figures.
Before beginning a study of the actual techniques and tools used in technical analysis, it is necessary first to define what technical analysis is, to discuss the philosophical premises on which it is based, to draw some clear distinctions between technical and fundamental analysis and, finally, to address a couple of criticisms frequently raised against the technical approach.
Technical analysis is the study of market action, primarily through the use of charts, for the purpose of forecasting future price trends. The term “market action” includes the three principal sources of information available to the technician-price, volume, and open interest.
The term “price action,” which is often used, seems too narrow because most technicians include volume and open interest as an integral part of their market analysis. With this distinction made, the terms “price action” and “market action” are used interchangeably throughout the remainder of this discussion.
There are three premises on which the technical approach is based:
- Market action discounts everything.
- Prices move in trends.
- History repeats itself.
One of the great strengths of technical analysis is its adaptability to virtually any trading medium and time dimension. There is no area of trading in either stocks or futures where these principles do not apply.
The chartist can easily follow as many markets as desired, which is generally not true of his or her fundamental counterpart. Because of the tremendous amount of data the latter must deal with, most fundamentalists tend to specialize. The advantages here should not be overlooked.
- Philosophy of Technical Analysis
- Dow Theory
- Chart Construction
- Basic Concepts of Trend
- Major Reversal Patterns
- Continuation Patterns
- Volume and Open Interest
- Long Term Charts
- Moving Averages
- Oscillators and Contrary Opinion
- Point and Figure Charting
- Japanese Candlesticks
- Elliott Wave Theory
- Time Cycles
- Computers and Trading Systems
- Money Management and Trading Tactics
- The Link Between Stocks and Futures: Intermarket Analysis
- Stock Market Indicators
- Pulling It All Together-A Checklist
- Advanced Technical Indicators
- Market Profile
- The Essentials of Building a Trading System
- Continuous Futures Contracts
Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications By John J. Murphy pdf