What is the best book on technical analysis?

Actually a good book to understanding price action but only as a reference is Toby Crabel's nook "Day Trading with Short Term Price Patterns and Open Range Breakout" ( i hope the title is correct).

The idea is that you should never take a book or a setup from a book and apply it in your trading.

You should come up with your own set of rules and most important, money management rules.
 
Another good one (and cheap) is "Charting the Stock Market: The Wyckoff Method":

http://www.amazon.com/Charting-Stock-Market-Wyckoff-Method/dp/0938773062

This is, as the title indicates, from the Wyckoff pov. It goes into basic price behavior like trend, range, climaxes, breakouts, shakeouts, upthrusts, reversals, continuations, pullbacks and retracements.

Alex, absolutely agree one must eventually come up w/one's own methodology, but I believe the OP was asking where to start, and one has to have a grasp of the basic tools before one can build a strategy of one's own.

H

Btw, I've heard the Crabel book is great. Never read it, since it sells on Amazon for $700 frickin' bucks.
 
Quote from rcanfiel:

None. Avoid TA and you will cut a lot of time chasing your tail.
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Wow, what an insightful and helpful post above. Telling someone your opinion of what does not work and then not following up with somethng you think may work....ha. Not a trader nor ever was I guess?




Mrs E - Start with money management. Van K Tharpe "trade your way to financial freedom" is a good one. Learn about risk/reward, expectancy and position sizing. And you will understand why strategy is not the most important factor in a succesful trading approach. It is not sexy but it is the bones and structure of any strategy.

Then anything by Murphy or Mcgee will fill you up with chart patterns and a technical approach. Regardless of what rcanfeld says there are 1000 ways to approach the market. And TA is as valid as any of them.
 
Yes, Wyckoff too. Great insights from people actually trading the markets. However, they are not for beginners.

The Crabel book is a collection of Mr Crabel's personal tests regarding opening range breakouts and short term patterns that refer to the Close vs Close or the Open vs Close relationship, also including range expansion influence... All in all, a read backed up by studies results.

The greatest thing a book should do is inspire one to search the market he is trading for short term action and come up with high-probability setups that he/she can apply them into their intraday trading.

Crabel's book is more setup oriented than wyckoff.

From this series i also reccomend The Taylor Trading Technique.
 
Quote from SWScapital:

Wow, what an insightful and helpful post above. Telling someone your opinion of what does not work and then not following up with somethng you think may work....ha. Not a trader nor ever was I guess?

Fine. Show any significant, well accepted evidence that it DOES work and I wil take it back. Dozens to hundreds of studies show the opposite. It is the best advice this person will get.

...

Then anything by Murphy or Mcgee will fill you up with chart patterns and a technical approach. Regardless of what rcanfeld says there are 1000 ways to approach the market. And TA is as edit: useless as any of them.

SOME EXAMPLES & FAMOUS QUOTES:

The Wall Street Journal Europe states "Whether technical analysis is really useful ... is a matter of some dispute on Wall Street. Some investors believe that it is impossible to forecast the market's ups and downs. Academic studies have shown that when most people, professionals and amateurs alike, try to move money in and out of stocks to beat market fluctuations, they tend to wind up with losses." The same article shows how several technical analysts can simultaneously make contradictory predictions.

Peter Lynch once commented, "Charts are great for predicting the past."

Warren Buffett has said, "I realized technical analysis didn't work when I turned the charts upside down and didn't get a different answer" and "If past history was all there was to the game, the richest people would be librarians."

a comprehensive study of the question by Amsterdam economist Gerwin Griffioen concludes that: "for the U.S., Japanese and most Western European stock market indices the recursive out-of-sample forecasting procedure does not show to be profitable, after implementing little transaction costs. Moreover, for sufficiently high transaction costs it is found, by estimating CAPMs, that technical trading shows no statistically significant risk-corrected out-of-sample forecasting power for almost all of the stock market indices

Economist Eugene Fama published the seminal paper on the EMH in the Journal of Finance in 1970, and said "In short, the evidence in support of the efficient markets model is extensive, and (somewhat uniquely in economics) contradictory evidence is sparse."

if prices quickly reflect all relevant information, no method (including technical analysis) can "beat the market." Developments which influence prices occur randomly and are unknowable in advance.

Princeton economist Burton Malkiel said that technical forecasting tools such as pattern analysis must ultimately be self-defeating: "The problem is that once such a regularity is known to market participants, people will act in such a way that prevents it from happening in the future."






 
Quote from rcanfiel:

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Hey axegrinder, why dont you share something instead of bashing TA everytime it comes up. How do you trade and what methods do you use?

And I am asking you to not modify my comments when you quote me. Or are you really such a dick?
 
Quote from SWScapital:

Hey axegrinder, why dont you share something instead of bashing TA everytime it comes up. How do you trade and what methods do you use?

And I am asking you to not modify my comments when you quote me. Or are you really such a dick?
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I shared something. I told him TA is a waste of time. You denied based on your opinion and without evidence, which has no value. Try reading the above more closely.

I asked for evidence, not whining. Or are you really so ignorant?
 
Quote from rcanfiel:

I asked for evidence, not whining
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I never said there was statistical proof. I answered the ladies question. And honestly at that. I told her to learn money management first. No matter what methods she uses.

Now how do you trade and what methods do you use?
 
Let's get one thing straight!

Throughout the history of trading there have been people saying TA does not work and have conducted studies showing it doesn't work AND there were also the same amount of people doing exactly the opposite thing and showing through studies that it does work.

The difference between these two categories is mainly in the fact the the first category are mostly academics and the latter category are mostly people who trade.

Almost everyone that says TA works are putting a strong emphasis on the fact that TA is not a tool for prediction. This is because they have learnt that through years of trading.

The academics are trying to prove TA has no predictive value.

And you know what!? Both are right!

TA cannot predict anything. TA is a method for analizing current market status and the trader, based on his experience will make a decision to go long, short or stand aside.

The market is a continuous battleground. No army that ever went to battle knew for certain what the outcome was. It would have been futile to try to read the future. But they did prepare and took everything in consideration, the battlefield, the opponent, the weather, their motivation etc.

Trading is the same. You need to prepare through analysis and then assume the risk of doing business.

If you lose, then cut it short. When you win, do the right things and make sure you actually bank profits, while letting some of them run. All the while making sure the odds are in your favour.

All the people that have the impression that trading is about beating the market are in my humble opinion the same people that are looking for the holy grail.
 
Crabel's book is more setup oriented than wyckoff.
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As I said, I'm unfamiliar w/the Crable book. However, Wykcoff certainly has setups in a general sense, and even w/some specifics. Wyckoff TA is always discretionary, granted, however there are certain principles that one can learn such as w/a shakeout.

Ideally, a shakeout should happen late in a range, following the intial period of trend climax (high volatility, wide spreads, strong volume) and then consolidation (low volatility, narrow spreads, contracting volume). Is the shakeout on a wide spread closing on the high back into the range? How deep was the test of previous range lows? What was the volume on the test, and how did it compare to previous tests of that support? And one can take it farther using Wyckoff w/relative strength against an index or like instruments. And so on.

Of course, a shakeout may occur very early in the range, or even w/in a trend, here the risk is greater as the reward may be greater. As w/all setups, one chooses that balance.

Harold
 
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