“With a focus on pragmatic portfolio theory, editor Charles Bassetti significantly contributes t the technical analysis body of knowledge especially related to tactics, and has created a book worth a space on every technican’s bookshelf.”
-Technically Speaking (Market Technicians Association monthly newsletter)
If you ask any stock broker, investment banker, or financial advisor, for resources to learn about trading, its very likely that this renowned book would be on their list. More than six decades and nine editions later, Robert Edwards and John Magee's Technical Analysis of Stock Trends is still considered the gold standard of technical analysis based trading. The current 9th edition has been updated to stay relevant in the current environment.
The editor starts off with an introduction on how he went about adapting this classic. However, it quickly jumps into a lot of theoretical trending information with very detailed coverage of the Dow Theory from the basic theory to specific examples in the past. The authors then discuss various trends including my favorite the Head and Shoulder trend line to help you predict which direction a stock will move based on past data. Several examples (over 200) are introduced to make sure the reader has understood this concept. I really liked that the editor pointed out the uncertainty with following such a trend system but at the same time promoting its benefits. The authors also outline the different strategies (options- either put or call) based on the predicted movement of a particular stock.
The second half of the book is devoted to specific tactics that can be utilized during different market conditions. Essentially, the authors break up the different theories into ways that you can apply them. For example, if you are deciding to invest in an energy sector company during a bear market with a Triangular Trend pointing to an upwards movement in price, you can navigate through to figure out the various metrics you need to chart (P/E ratio, revenue, profits, etc) in order to determine the optimal time to invest and the investment tool (stock versus option). The authors also devote a short time to explaining similar trending patterns and tactics in the commodity market.
Overall, I have mostly positive things to say about this book. However, this book is more useful as sort of an instructional manual when trading stocks. If this is your first time investing I would not recommend reading this book. Instead, get something like Stock Trading for Dummies, so that you can be familiar with all various investment terminology. Then, open an investment simulator account for free using Investopedia or a similar platform and as you start reading this book practice the tactics on your simulated investments. Keep referring to the book as you make decisions about your portfolio. The tactics in the book, although they might seem technical at first, are actually very easy to chart using Google Finance, Morningstar, or similar. So, hold on to this book as a reference so that you can finally start making data driven decisions instead of just trading based on a stock tip from your buddy!
In the age of overdeterming macroeconomic factors, ETFs, high frequency trading, hedge funds, etc., technical analysis is a total waste of time for the average Joe sitting at his workstation trying to day trade. For every chart that shows a meaningful pattern, there are 5 that show no pattern at all. The technician, out of necessity of his methodology, is forced to make meaning of a chart which is likely just a random collection of observations. Just because a price happened to bottom or top twice consecutively at the same point doesn't mean that there's 'support' or 'resistance' at that level. Sometimes there are legitimate support and resistance levels, but more often than not, those are illusory. Support or resistance levels evaporate and reset all the time.
Fundamental analysis puts the investor in a much better position to actually succeed in my opinion. Earnings, price, book value, growth, forward earnings, debt levels, etc. are not subject to any interpretation. They are what they are. It might take any given stock a long time for it to align w/ its fundamental valuation, but the relative predictability that one sees in P/E levels for different types of businesses of varying sizes and growh prospects makes the fundamental school the more rational approach.
Also, anyone who believes that markets are 'efficient' hasn't paid much attention to markets. Lacking a material event (earnings release, management shake-up, etc.) a company's price will largely be pulled around in lock-step w/ the broader market.
These are known as the facts. The subject book is probably ok, but it starts w/ the wrong premise.
I am a former student of Professor Bassetti; I took his FI 498S Building Efficient Trading Systems class this summer at Golden Gate University. During the course, in his widely-read weekly newsletter on edwards-magee.com, Professor Bassetti correctly predicted the August 2011 correction, which was picked up by MarketWatch on July 27th.
Technical Analysis of Stock Trends was a textbook for the FI 498S course, along with his other investment and trading books -- StairStops and Zen Simple. StairStops and Zen Simple are available on Amazon (Kindle versions available), and I found them helpful in clarifying concepts from Technical Analysis of Stock Trends.
This is one of the best books on trading ever written! The book contains two parts. In the first part you learn the theory of technical analysis such as price and volume action. In the second part you do practice. I know a lot of books that give you just fundamentals without saying how to apply those fundamentals in practice. This book is a perfect exception! Authors did a great job! Though a book has been written in 1940s, it still remains in print and contains valuable insights into how market really works. The only chapter that I would exclude from the book is chapter about trading in futures which has been added to this edition of the book. You can tell by reading this chapter that the language is different, more difficult to comprehend and tells a lot of different indicators that you don't even need to know. So, skip that chapter and enjoy the rest of the book!
4 stars for the volume of thoroughly well researched examples and exhaustive coverage of basic patterns.
This book is comprehensive but not complete. There is no information on some modern indicators or, for example, candlesticks or point and figure.
I have the 8th edition.
This book is good to have and I did learn valuable things from it but if you are only going to buy a few books, I would not recommend this as one of them.
On the plus side, there are many many actual stock chart examples. That adds to the length in a good way.
Writing style is very much early 20th century; leisurely rather than short and to the point.
This book is geared toward stocks and commodities but not forex. (although the stock patterns also apply to forex)
I'd recommend this book to anyone wanting an introduction to technical analysis. It is written like a textbook with topics addressed in logical order. This book covers detailed descriptions and analysis of many traditional chart patterns and some attendant trading strategies. Numerous examples are given in annotated charts. Technical terms are defined and explained.
In the ninth edition (©2007), Appendix E contains a Turtle Trading System manual written by Curtis Faith (one of Richard Dennis' original Turtles) - a dated but nevertheless instructional description of a mechanical trading system.
Though this book is a great educational tool, I feel it would be a mistake to take it all literally as a guide to trading. The original author, Magee, last updated the book in 1966. He goes out on a limb regularly in his advice on how certain patterns 'typically' resolve. The probabilities with which his rules apply to today's markets would undoubtedly vary from pre-1966 markets. William J. O'Neil, in his renowned How to Make Money in Stocks (©2009, p.-146), said that many patterns discussed by Edwards & Magee such as triangles, coils and pennants have, in recent times, shown to be "unreliable and risky" patterns "without sufficient time or price correction to become proper bases."
I found the book a frustrating slog to get through because Magee uses a very formal, wordy and repetitive writing style. In the eighth and ninth editions professor Bassetti has added numerous editor's notes and extra chapters to the original, but frequently uses awkward, incomplete sentences to belabor the obvious. More annoying were Bassetti's repeated attempts to be clever, e.g. p.- 415: "The wild frontier of the Internet and of the gunslinger speculators. Amazon bucks on. Give us a slug of rotgut whiskey and get out the ruler", or "one might almost say awesome, if the word were not in such currency on `Saturday Night Live' and the `Comedy Channel'". This sort of running commentary gets tiring after 800 pages.
Product Details :
Hardcover: 840 pages
Publisher: AMACOM; 9th edition (February 26, 2007)
Language: English
ISBN-10: 0814408648
ISBN-13: 978-0814408643
Product Dimensions: 6.5 x 1.8 x 9.6 inches
More Details about Technical Analysis of Stock Trends 9th edition
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