Nothing is better than continuous education. And in this respect, we at doitinvest.com did read and review quite a lot of books in the technical analysis field lately. We don’t have any statistics readily availabel, but I suppose that doitinvest.com has become a top reviewer of the trading books and materials published since 2009…
Now back to work :). I recently got for review one of the books deemed to be a full encyclopedia of techical analysis techniques. So I got quite curious – was it so?
The first look at the book content was quite convincing. The book is very well organized and takes the reader from the basics to the most advanced techniques. It starts with the fundamental assumptions of the technical analysis field – is the random walk theory valid? Are the trends predictable? What is the blend between mass psychology and statistcis which allows you to make money from analysing the markets? What are the main assumptions behind technical analysis and how well do they stand the test of practice? and so on.
The book is relatively accademically written, meaning that it makes refferences to lots of literature pieces. However, the refferences are there only to be addressed and not to block the flow of reading, which I liked. I also liked a lot the review questions testing your understanding of the concepts at the end of each sub-chapter. Last time when I used this recap approach (besides my student times, long time ago in another galaxy) was with Alexander Elder’s “Come into my Trading Room” study guide. At that moment, I enjoyed checking my understanding of the trading book. And believe me, this helps people with the attention deficit syndrome (like myself) to stay focused on the goals of the book and memorize actually some useful principles.
What I also liked was the relative comprehesiveness of the “Technical Analysis: The Complete Resource for Financial Market Technicians”. It does not go into a great level of detail with each topic, indeed. This would be difficult, since each such subject has tons of years and books behind. But this technical book is quite complete, since I failed to spot any missing major subject in the field. The book goes through may topics which I found interesting such as:
– the history of the technical analysis (a topic vastly ignored by most of the books in the field);
– the markets sentiment and the dow theory – the theories which shaped the aggregation of the market feelings in the actual sophisticated charting techniques;
– how to measure the strength of the market – or the basics of a technical analysis;
– temporal patterns and cycles, flow of funds etc.
Maybe the most interesting part is the third one – trend analysis. Of course here any decent trader must know the basics, otherwise he/she would be very quickly out of the game (in the red losses zone). The detailed approach of “Technical Analysis: The Complete Resource for Financial Market Technicians” paid off for me by covering the gaps (or worse – the misconceptions) I had about technical analysis. For example, I knew lots of things about “points and figure” charts, yet I ignored constantly their interpretation based on the type of scale those graphs used – arithmetic or logarithmic. The latter accelerate the graph trends since they give more weight to the latest figures plotted and this might explain their relative higher usefullness in the faster markets, as well as their shortcomings in the more stable markets.
Another chapter which I enjoyed was the one reffering to the system testing and management. I know that most books nowadays start with the warnings – on how the trading system should be devised, how it should be tested and how it should be periodically changed to prevent its shortcomings. Fine and well, yet most books fail to present the theoretical basics on how to do the testing job with any system, not just with some particular one. “Technical Analysis: The Complete Resource for Financial Market Technicians” goes there and stretched my understanding a bit with its remarks simillar to the project management rules I had on my master courses. Long time ago, yet the link was so useful for me.
All in all, htis is a nice lecture and a book to keep on the working shelves for quick refferences. Enjoy!