Technical Analysis of Stock Trends

There are three major, critical tech analysis books. The first one is John Murphy's. The second is this one. It is well worth your time. The last one is Bruce Kamich's "How tech analysis works." If you read any of these -- or better yet, all 3 -- you WILL have a firm grasp on why charts are important and how charts are properly read..... Again, these are the only 3 charting books you need as they are the most comprehensive....

I read Edwards and McGee, Technical Analysis of Stock Market Trends with great enthusiasm. Here was a book that was originally written in the 1940's that is equally valid to anyone trying to play the stock market in the Twenty First Century. It also gave me insights into the wild times on Wall Street in the Roaring 20's, and taught me how the pros did stock manipulation and organized "bear traps." Understanding Wall Street irrational exuberance in 1928 helps a smart investor understand the irrational exuberance in 1999. I started reading and then using Technical Analysis because I found I couldn't make money on the market just using the fundamental analysis that my accounting professors taught me in business school. I bought stocks based on detailed analysis of the firm's fundamentals and then could not understand why the prices of my "smart" investments immediately dropped like a rock. Technical analysis provides an investor with insights into the market forces (supply and demand) that affect the rise and fall of stock prices and give a rational investor understanding of the psychology of the herd of investors. Modern web technology available from Clearstation and E-trade take the drudgery out of the technical charting, and make it easy for an amateur investor to become an experienced technical chart reader. Edwards and McGee was the book that helped me develop this skill. I can not praise the authors of this book enough.

This is a textbook, and as such, the reader should not expect to be able to breeze through it. I read it over the course of a month, highlighting the most important points with a yellow marker, just as I did my textbooks in college. The effort was well worth it. I now feel that I have a practical basis upon which to evaluate the chart of any stock. I know when to buy, when to sell and when to sit and wait. My investing strategy is 1000% better than it was a year ago, and I owe it all to this book.

As has been said in the other reviews, this is a "classic." As such it challenges the reader to absorb extremely detailed analysis and information presented in a dry and straightforward manner. I bought the book over a year ago and have found it impossible to read in one sitting or even in a series of sittings. I have, however, found it extremely enlightening and have been able to read it in parts, and use it as reference in my trading activities. Some chapters I have had to read up to 4 or 5 times to really understand. It is clearly a better reference work than text and should not be used as a text by a raw beginner.

The Greek philosopher Heraclitus once observed that it is impossible to step in the same river twice. By that statement he meant, seemingly, that everything is in a state of change. Hence, if Greg Louganis decided to jump off a diving board into the Mississippi River, he would never be able to plunge into the same water molecules more than once. By the time he attempted his second jump, the water which gave way during his first dive would be a long way down the river on its route toward the Gulf of Mexico. Accordingly, Heraclitus's analogy, one could argue, is applicable to the study of securities markets: although companies have traded their stock on exchanges for decades, even centuries, the stock markets themselves are always in flux because participants--investors, as well as the companies themselves--are constantly leaving and entering the game. Robert Edwards' and John Magee's classic TECHNICAL ANALYSIS OF STOCK TRENDS was written fifty years ago, long before such hallowed American companies as Microsoft, Dell, or Cisco Systems were in existence. Although the stock markets are indeed "rivers of change," it is clear that this book remains the standard guide for investors and traders who believe that technical analysis is an effective approach to predicting the future behavior of stocks. Modern readers should be aware, however, that too many of the charts in the book are from obscure, even defunct, companies from the 1940's; the appendix "Updated charts through 1996" is helpful but out of place in the back of the book. These charts, rather, should be placed in the text of the book in order to illustrate the book's key principles. Those interested in applying technical analysis to the future markets should also consider Jack Schwager's recent guide to technical analysis. It would seem impossible, though, that those still interested in trading stocks technically could avoid reading Edwards's and Magee's useful volume, a guide that remains a constant in a world of change.