Technical Analysis of Stock Trends PDF

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Book Summary

Here is a strange event. A book written in the mid-20th century retains its relevancy and importance to the present day.

In fact, Technical Analysis of Stock Trends remains the definitive book on the subject of analyzing the stock market with charts.

Knock-offs, look-alikes, and pale imitations have proliferated in its wake like seagulls after a productive fishing boat.

But the truth is they have added nothing new to the body of knowledge Edwards and Magee originally produced and Magee refined up to the 5th edition.

What accounts for this rare occasion of a book’s passing to be a classic? To

be more, in fact, than a classic, to be the manual or handbook for current usage? To answer this question we must ask another. What are Chart formations?

Chart formations identified and analyzed by the authors are graphic representations of unchanging human behavior in complex multivariate situations.

They are the depiction of multifarious human actions bearing on a single variable (price).

On price converge a galaxy of influences: fear, greed, desire, cunning, malice, deceit, naiveté, earnings estimates, broker need for income, gullibility, professional money managers’ need for performance and job security, supply and demand of stocks, monetary liquidity and money flow, self-destructiveness, passivity, trap setting, manipulation, blind arrogance, conspiracy and fraud, and double-dealing, phases of the moon and sunspots, economic cycles and beliefs about them, public mood, and the indomitable human need to be right.

Chart formations are the language of the market, telling us that this stock is in its death throes; that stock is on a rocket to the moon; that a life and death battle is being waged in this issue; and in that other, the buyers have defeated the sellers and are breaking away.

They are, in short, the inerasable fingerprints of human nature made graphic in the greatest struggle, next to war, in human experience.

As Freud mapped the human psyche, so have Edwards and Magee mapped the human mind and emotions as expressed in the financial markets.

Not only did they produce a definitive map, they also produced a methodology for interpreting and profiting from the behavior of men and markets.

It is difficult to imagine further progress in this area until the science of artificial intelligence, aided by yet unimaginable computer hardware, makes new breakthroughs.

Trading and Investment Instruments

The new universe of available trading and investment instruments must be taken into account.

The authors would have been in paradise at the profusion of alternatives. In this future world, they could have traded the Averages (one of the most important changes explored in this book); used futures and options as investment and hedging mechanisms; practiced arbitrage strategies beyond their wildest dreams; and contemplated a candy store full of investment products.

The value and utility of these products would have been immeasurably enhanced by their mastery of the charting world of technical analysis.

As only one example, one world-prominent professional trader I know has made significant profits selling calls on stocks he correctly analyzed to be in downtrends, and vice versa.

an obvious (or, as they say, no-brainer) to a technician, but not something you should attempt at home without expert advice, Techniques like this occasioned the loss of many millions of dollars in the Reagan Crash of 1987.

The Crystal Ball

Investors will get smarter and smarter, starting with those who learn what this book has to say.

The professionals will stay one step ahead of them, because they are preternaturally cunning and because they spend all their time figuring out how to keep ahead of the public, but the gap will narrow.

Software and hardware will continue to advance, but not get any smarter. Mechanical systems will work well in some areas, and not in others.

Mechanical systems are only as good as the engineer who designs them and the mechanic who maintains them. Buying systems is buying trouble.

Everyone should find his own method (usually some variant of the Magee method, in my opinion). All good things will end.

All bad things will end. The bag of tricks with which the insiders bilk the public will get smaller and smaller. New and ingenious procedures will be developed by the insiders.

The well of human naiveté is bottomless. For everyone educated, a new one will be born in a New York minute.

It is deeply disturbing at the turn of t century that the owners of the NASDAQ and the NYSE should be thinking of going.

AuthorRobert D. Edwards, John Magee & W. H. C. Bassetti
Language English
No. of Pages836
PDF Size53.2 MB
CategoryStock Market

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