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There are a wide range of books available for learning technical analysis, covering topics like chart patterns, crowd psychology, and even trading system development. While many of these books provide outdated or irrelevant information, there are several books that have become timeless masterpieces when it comes to mastering the art of trading. In this article, we will look at seven books on technical analysis to help traders and investors better understand the subject and use as possible strategies in their own trading. Getting Started in Technical Analysis:- Jack Schwager This book is an excellent starting point for novice traders that covers every major topic in technical analysis. In addition to covering chart patterns and...

This article is aimed at all those new to trading and we look at the basics of what technical analysis actually is. What is Technical Analysis? Technical analysis is the study of price data and statistical indicators that are formed by market activity. Market activity illustrates the flow of supply and demand. This supply and demand is a reflection of beliefs and opinions translated into human behaviour and specifically, herd mentality. Therefore, technical analysts would argue, price patterns and indicator signals can be categorised based on historical data with a reasonably high expectation that they will occur again at some point in the future. This argument is based on the theory that human behaviour is innate and, although it...

Part of the learning process is for you to understand the different types of traders. In essence there are two, and these are a fundamental trader or a technical trader. For you to succeed as an online trader you must understand the differences. Both have very different views in the techniques they use to assess market conditions and the direction an instrument may take. Whilst there is some overlap, these are two very distinct methodologies, and you need to be comfortable with one or the other. You will come across this terminology all the time. Whilst there are huge differences in the approach, it is safe to say that most large financial institutions now employ both methods as both have their strengths and weaknesses. Fundamental...

Advances in technology have been the driving force behind the change and growth in the world of market speculation. One of the many recipients of faster and stronger technology is system trading as high speed computers now help retail and institutional traders develop systems, crunch numbers, and back test hypothetical results in seconds. In the world of professional money management, I have seen plenty of trading systems. Ironically, most don't seem to work and of the ones that do, they typically work for a bit and then fail. Being on the education side of the industry as well, I have seen hundreds of automated systems yet, I can only say that I have seen less than a hand full actually produce a consistent profit year after year. I...

Most consider the father of technical analysis (the science of forecasting market movements based on price patterns) to be Charles Dow, the founder of Dow Jones and Company which publishes the Wall Street Journal. Around 1900 he wrote a series of papers which looked at the way prices of the Dow Jones Industrial Average and the Dow Jones Transportation Index moved. After analyzing the Indexes he outlined his belief that markets tend to move in similar ways over time. These papers, which were expanded on by other traders in the years that followed, became known as "Dow Theory". Although Dow Theory was written over 100 years ago most of its points are still relevant today. Dow focused on stock indexes in his writings, but the basic...

Does your trading lack the "trader's edge" needed to be a consistent winner in the markets? Do you find yourself entering and exiting positions at the very wrong time? If the answer is yes, you're not alone. The good news is that there is a very specific reason why the majority of traders enter and exit trades with very poor timing. Also, the answers needed to fix this problem are far simpler than you may think. To gain the edge and learn how to stack the odds in our favor, we will go back to the school of basics, not just to review the basic concepts but more importantly to look at them very differently than we have before. We know that if we look at charts, indicators, and any other tools used to perform market analysis the same way...

The most important thing in any type of trading is to have a solid set of rules and then to have the self control to follow those rules. Day traders especially need to have rules to follow as emotion can and will have you buying and selling at the wrong time. Day Trading Rules: Only enter trades when price is at a support (demand) or resistance (supply) level, no matter what time of day or night. Two types of entries: Breakouts and first pullbacks (see below). Each day, identify one demand and supply level in each market, using a larger intra-day time frame. Always know where the market is in the larger picture with regard to supply and demand. Only trade opportunities that offer at least a 3:1 profit zone to the first target...

Charles H. Dow It is interesting and amazing to note that not until Charles Dow started compiling the Dow Jones Industrial and Dow Jones Rail Index and started writing about the stock market a little over a hundred years ago, stock speculation was regarded merely as a game for the rich or as gambling for the brave. Sure, there were the tape readers, but the majority of the public regarded Wall Street as a source of excitement - the entertainment provided freely (unless you were on the wrong side) by figures such as Cornelius Vanderbilt, Jay Gould, and the infamous Daniel Drew. In a series of stunning editorials for the Wall Street Journal at the turn of the century, Dow laid out the foundation of his own theory on the stock market...

Introduction The key to successful trading is having a methodical approach and not being emotional about your trading decisions. Never forget that it is always best to accept when you are wrong and cut your losses where appropriate. Technical analysis, also referred to as "charting", involves the use of charts or graphs to present historical performance and price changes at a glance and the ability to use this information in order to make investment decisions. The first golden rule of technical trading is, where possible, to keep charts as simple as possible. Technical Analysis and Charting Even those new to trading will be familiar with the image of a chart in relation to the financial markets. They appear on City Traders? screens...

The author looks at ways of profiting from trends by using Moving Averages. Identifying and profiting from trends can be at times divergent topics and this dissociation can easily translate to losing trades. While trend analysis, as defined by trend and channel lines, ratio and extension analysis is vital, traders should also go beyond pattern recognition and employ quantitative methods of analysis. One of the most popular tools is moving averages. What Is a Moving Average? A moving average smoothes market swings, as some traders prefer to keep the statistical noise at a low level. To calculate a simple average, simply determine the arithmetic mean. To make an average move, just add the last price of the period of you choice, while...

Candlestick charts are widely used by traders around the world, as superficial demarcations between East and West are thankfully fading away. While bar charts are still more popular because of sheer inertia, there is little doubt that candles provide much more information, even though both types of charts are based on the same prices. Let's take a look at the advantages of using candles when gauging the validity of intersections. Traders make a big deal about prices breaking support and resistance lines, trendlines, moving averages and retracement or extension levels. However, intersecting these lines on an intraday basis and closing outside them are two very different ball games. Benefits for Using Candlesticks Let's quickly...

As a Short-term trader do you ever look at longer term time frames? If not, then this article will explain why the longer term time frames can influence the shorter intraday ones. Most independent Short-term Traders tend to ignore the Long-Term technical condition of the Market because they believe it is not important in their trading. Few things are further from the truth, that is, if you want to survive the market over a long period of time, and still be trading years, even decades from now. In the same manner that the tides can raise or sink all ships, the larger trends, behavior and technical design of the markets greatly affects ALL independent traders, regardless of trading style. You can have an independent short-term trader...

In the first and second parts of this series I looked at some of the various elements you will need to master if you are to have a chance of succeeding at trading. In this final article, I will run through a strategy I have used in the past to illustrate some of the concepts previously discussed. Basic Strategy The UK stock markets tend to be range-bound, especially on a short-term basis. This strategy looks to buy low and sell high, so it is swing based. It uses the basics of support, resistance and trendlines combined with money management as I've discussed earlier. The Rules: Look for a test of support or resistance or a trendline that fails to break. If it tests support and bounces up, then go long and place the stop just...

In part 1 of this article, I looked at some of the basic elements of trading, including chart reading and money management. In this second part, I will consider some other essential issues, such as the need for discipline in trading and the importance of practice and planning. The Importance of Discipline I have previously mentioned why it is important that you DON'T move a stop-loss to increase risk, and I wanted to go through the "what if" scenario of letting a stop run. We'll take this example from Barclays from January 2003. Here we have a nice double (or even triple) bottom on support, and a clean bounce up. You take this long entry with a tight manual stop at 360. This is what happens over the days to come... Brilliant...

The Basics of Trading I've had a long running thread on the T2W boards giving an introduction to the central themes of trading. This series of articles has been adapted from that thread and will take you through all the areas you need to get a start in trading, from chart reading to defining a strategy. In Part 1 I will look at: Basic chart reading Money management Exiting a losing trade Setting a price target Part 2 will then consider: The importance of discipline Paper trading The trading plan And finally, in Part 3, I will bring it all together by taking you through a simple trading strategy. Basic Chart Reading Ok let's start with the basics of chart reading and deal with Support, Resistance and Trendlines. This...