Technical Analysis of Stock Trends, Ninth Edition Hardcover – Feb 26 2007
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..".worth a space on every technican's bookshelf." -"Technically Speaking" (Market Technicians Association monthly newsletter), May 2007
About the Author
Robert D. Edwards and John Magee wrote the original edition of Technical Analysis of Stock Trends. Magee is considered the father of technical analysis, while Edwards was a pioneer in pattern formation and trend analysis. W. H. Charles Bassetti (San Geronimo, CA) is Adjunct Professor of Finance and Economics at Golden Gate University and a former executive in the options and commodities trading industries.He was both a student and client of John Magee.
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Top Customer Reviews
It provides an intuitive understanding on how patterns and trends are developed.
Not only is this book any interesting read for investors looking for a competitive advantage, but it is also an interesting read from a psychology perspective.
Humans are such habit forming creatures, it is only natural to find structure in something seemly random.
Most Helpful Customer Reviews on Amazon.com (beta)
In this edition, Bassetti delivers much more than an update - it's actually a new book. He focuses on strategies for increasing profits:
* The basics of traditional chart analysis are clearly presented, just as Robert Edwards meant for them to be. In keeping with the practice of earlier editions, Bassetti retains the original charts showing examples of patterns from the 1940s and earlier. He also includes more than two dozen new charts, demonstrating that the same old patterns still work today. The detailed discussion of the market psychology that forms these patterns may stimulate modern analysts to program the patterns.
* Adds a comprehensive explanation of Magee's "basing points" procedure for setting initial and trailing stops on any position. Bassetti adds a chapter and charts to clarify this powerful concept, which in itself is worth more than the cost of the book.
* For what may be the first time, Bassetti provides an annotated chart of the Dow, combining an in-depth discussion of Dow Theory with a visual history of the signals. We've all seen tables showing the sell signal in Oct 1929 or the buy signal in late-1990 which lasted more than seven years, but the chart erases any doubt that Dow Theory is a valuable timing tool. Creating a comprehensive source on the Dow Theory, he also includes an overview of Robert Colby's method to automate the signals.
* Provides a link to [...] which offers downloadable material that supplements the text. As one example, readers can download pdf files of the Dow Theory signals for closer examination.
* Offers new perspectives on short-term and futures trading. The extensive new material on commodity trading, including a complete trading plan, was not addressed in previous editions.
Bassetti also ensures the reader understands the similarities between Magee's Sensitivity Index and Modern Portfolio Theory's Beta; and the striking resemblance of Magee's Composite Leverage to the financial engineering concept of Value at Risk. Readers of previous editions may not have realized that Magee developed these concepts decades before Nobel Prize-winning work was undertaken in these areas. Magee wrote in the language of the trader (semi-log charts), rather than the academician and his ideas have been overlooked by economic theorists.
A classic book is one that stands the test of time. No one can argue that Technical Analysis of Stock Trends fails in this regard. Patterns that worked a hundred years ago are still found in financial markets and they still work. The forecasting ability of patterns lies in their ability to document the history of human nature, which remains unchanged over many centuries.
Another feature of classic works is a unique style. Edwards and Magee filled their work with examples - current at the time of publication. They wrote with clarity and ease of style not usually found in textbooks. Their text was a practical "how to" manual that explained the "study of the action of the market itself" in concrete terms. It appealed to those seeking the Holy Grail on Wall Street, and to those serious students of the markets seeking an edge. In this new edition, Bassetti retains all of their style and introduces his own, which in all ways is similar to the original, but with a modern edge.
Bassetti believes that Magee's concept of basing points is worth a great deal of additional study. This is one of the most significant contributions he makes to the new edition, updating this section in the tactics to ensure that all traders understand this method of stop placement. His example is clear, and the reader can instantly implement this technique, which Bassetti thinks of as one of the most valuable in the book.
Some question whether classical chart reading is still a valid discipline in an era defined by cheap data, powerful scanning and backtesting software, instantaneous execution and quantitative analysis. After reading this book, you'll be left with a deeper appreciation of the value of chart reading and will become an even stronger proponent of technical analysis in modern markets.
But does this approach work? This will depend on the individual. For example, you and I can trade the same stock for 3 years applying technical analysis but the end result can very well be that one of us ends up with a big profit and the other a big loss. The reason is due to the following factors: which patterns to take, the spot where you get in, how far to let a position move against you, and where to take a profit. As you can see, technical analysis is somewhat subjective.
You probably know that there are no guarantees in the trading game. And chart formations are NOT infallible. All the stuff taught in this book will short circuit at one time or another causing a loss. You could even fall into a losing streak. Thankfully, the authors give fair warning about the dangers involved. But despite the unpleasant prospects, this book remains one of the very best places to learn the theory of technical analysis of charts. I recommend going with the 4th or 5th edition, that is all you really need to capture the essence of the material, plus, you'll save yourself a few bucks.
Technical Analysis of Stock Trends
You get more "bang for your buck" if you buy the used (Revised) 5th edition and still have some money left in your pocket.
I remember paying just $12.50 for 4th edition in the early 60's. I don't think the supplements(upgrade) to the text to bring in modern stocks is worth the extra bucks. Why spend the extra bucks and get hoodwinked? Charts are always open to interpretation but a master trader who trades everyday can eyeball charts and interpreted them a lot better. Haven't you noticed in everyday life the most skillful people who have the most knowledge come from family generations who did the same business.
You need to work at it to be just as skillful in any business since making profits in a stockmarket does not come easy at first.
What you see is the same type of stock patterns that your Grandpa would have seen if he traded stocks. These price patterns are like road signs you should be able to visualize them on any chart regardless what time-frame. Not knowing stock patterns when they are completed is like driving through stop signs. After you have read this book you should be very skillful in drawing trend lines,channel lines, and identifying trends on any chart. Even today using a newer stock symbol you see the same old basic chart patterns occur as the old fashioned charts a century ago. No oscillators or momentum-based indicators are needed on your chart. Experience is your best teacher when you look at chart patterns and there are many more to identify that you discover on your own. In the market you must look at what is happening now then predict what is going to happen, not what has already happened to make money. The market always looks through the front windshield not through the rear view mirror like the news media, just after the fact.
As with any bible, if you are going to take short term trading seriously, (which you most certainly should), this book should not only be read, but carefully studied, and it's teachings analyzed and followed.
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