How Technical Analysis Works

Submitted by Book Library on 5 April, 2010 - 14:42

In clear and concise terms, author and chartered market technician Bruce Kamich explains the basics of charting and analysis and how, by using the technical analysis approach, investors can identify trends, buy at the bottom, sell near the top. Written for today's volatile market, kamich offers a tested approach to technical analysis that can be used as a timing tool, a selection tool, and, most important, a risk management tool. The author looks incisively at the role of charts in technical analysis; he offers clear instruction on how to read charts, how to determine their drawbacks as well as their benefits, and how to decide which chart to use for different scenarios.

Also covered is key information not found in other market strategy book, including the importance of trends and how to identify them; chart patterns; how to trade reversals ad gaps; logical indicators; and much more. Finally, Kamich provides cas studies that illustrate technical analysis in action. For day and online traders, portfolio and money managers, finance students and even traditional brokers, How Technical Analysis Works (New York Institute of Finance) gives investors what they'r really looking for; the techniques for making the right buy and sell decisions.

Positive Review of Book

Bruce Kamich has written one of the best books on technical analysis that I've seen in a long time. Unlike most introductory books, it neither over simplifies, nor does it make it seem as if you need a PhD to learn how to use technical analysis. The book explains how and why technical patterns and indicators work in an entertaining way. On top of that, the examples of patterns in the book are not "text book". You actually get to see what these things might look like in the real world instead of the perfect picture you see in most books. This is invaluable. On top of that, the book is a bargain!

Negative Review of Book

Definitely provides a good review of many TA approaches and I really like how Kamich inputs his personal commentary on the market psychology represented by the charts. The big weakness of this book is the lame charts. Considering this is a TA book, which is all about charts, one would think there would be good examples... There are not! I found myself drawing many of the charts he described. In my opinion, he should have provided them.

Author Biography

BRUCE KAMICH is a chartered market technician and journalist and was formerly a vice president at MCM, Inc., where he managed the online advisory service MONEY WATCH for institutional money managers ad traders. He has almost thirty years of market experience as a technical analyst, trader, and broker for a number of Wall Street firms. Currently adjunct professor of finance at Baruch College and Rutgers University, Mr. Kamich is also a two-time president of the Market Technicians Association and currently sits on its board as well as on the board of the International Federation of Technical analysts.

Table of Contents

  1. History and Background
      • The Early Years
      • The Growth Years; 1880 to 1950
      • Dow Theory
      • Charts
      • Early Indicators
      • The Modern Era
  2. How Technical Analysis Differs From Fundamental Analysis
      • The Fundamental Approach
      • The General Economy
      • The Technical Approach
      • Differences
      • The Logic of the Technical Approach
      • The Market discounts Everything
      • Is the News Important?
      • Prices Move in Trends
      • History Repeats itself
      • The Relativity of Market Movements
      • Follow the Smart Money
  3. The Role of Charts in Technical Analysis
      • A Chart Is Your Road Map
      • Two Methods of Scaling Charts
      • Arithmetic Scaling
      • Logarithmic scaling
      • Dependable line Charts
      • Construction Line Charts
      • Benefits of Line charts
      • Drawbacks of line Charts
      • Bar Charts
      • Constructing Bar Charts
      • Interpreting Bar Charts
      • Benefits of Bar Charts
      • Drawbacks of Bar Charts
      • Point and Figure Charts
      • Constructing Point and Figure charts
      • The Wheelan Method Versus the Cohen Method
      • Benefits of Point and Figure Charts
      • Candlestick Charts
      • Constructing Candlestick charts
      • Create your Own Candle Lines
      • Benefits of Candlestick Charts
      • Drawbacks of Candlestick charts
      • Other Charting Techniques
      • How to Decide which Chart to Use
      • What is Your Time Horizon?
      • What are Your Needs?
      • A Combination Can Be the Key to Success
  4. Keep your Eye On The Trend
      • Types of Trends
      • Identifying Trends
      • How Trends are Formed
      • Why Uptrends End
      • Drawing Trend Lines
      • Time Horizons
      • Trend Lines and volume
      • Trend Line Breaks
      • Return Moves
      • Trend lines Through the Closes
      • Internal Trend Lines
      • Using Trend Lines Successfully
  5. The Key Building Blocks of Support and Resistance
      • Defining Support and Resistance
      • Where Support and Resistance Levels Come From
      • Precision Doesn't Count
      • role Reversal
      • Determining the Validity of Support and Resistance
      • Understanding Psychological Support or Resistance
      • Using support and Resistance
      • Finding support and Resistance
      • Retracements
      • Price Objectives
      • Moving Averages
      • Extrapolating Trend Lines
      • Price Markups
      • Volume at Price
      • Uncharted Territory
  6. Patterns to Profit By
      • The Head and Shoulders Pattern
      • How Head and Soulders Patterns are Formed
      • The Left Shoulder
      • The Head
      • The Right Shoulder
      • The Return Move
      • Price Projections
      • The Inverse Head and Shoulders Pattern
      • The Left Shoulder
      • The Head
      • The Right Shoulder
      • The Neckline
      • Double Tops and Bottoms
      • Double Tops
      • Double Bottoms
      • Behind the Price Action
      • Price Targets
      • Triple Tops and Bottoms
      • Spotting a Major Reversal Pattern
      • More Patterns to Look For
      • Broadening Tops
      • Saucers
      • Line Patterns
      • The Cup and Handle Pattern
      • V Tops and Bottoms
  7. Reversals Can Keep You on Your Toes
      • The Top Reversal Day or Buying Climax Spike Days
      • 2 Day and 2 Week Reversals
      • Outside Days
      • Inside Days
      • Exceptions are the Rule
      • A Close Above the High of the Low Day
      • A Close Below the Low of the High Day
      • The Island Reversal
      • The Hook Reversal
  8. Consolidations are Great Entry Points
      • Flags and Pennants
      • Bull and Bear Flags
      • Bulll and Bear Pennant Formations
      • Trading Strategy
      • Triangles
      • The Symmetrical Triangle
      • Get a Second Opinion
      • The Target
      • Timing
      • Ascending Triangles
      • Descending Triangles
      • Trading Strategy
      • The Rectangle
      • The Rare Diamond Pattern
      • Wedges
      • The Rising Wedge
      • The Falling Wedge
      • Interpreting Wedges
      • Targets
  9. Gaps: What's Not There is What's Important
      • Where to Find Gaps
      • Gaps to Ignore
      • How We Measure Gaps
      • The Breakaway Gap
      • The Runaway Gap
      • The Exhaustion Gap
      • Gaps as Part of Island Reversals
      • How to Trade Gaps
      • Find the Halfway Point
      • Gaps on Candlestick Charts
  10. Draw your Own Trend Lines and Channels
      • What Defines a Channel?
      • How to Profit From Channels
      • Watch for Early Signals
      • Channels as Indicators of Turns
      • Price Targets
      • Trading Channels
  11. Moving Averages Smooth Things Out
      • Trend-Following Indicators Versus Oscillators
      • How Moving Averages Have Changed
      • What do We Average?
      • The Simple Moving Average
      • Applying Logic
      • Match the Length to the Trend
      • Drawbacks to Simple Moving Averages
      • The Linearly Weighted Moving Average
      • The Exponential Moving Average
      • Signals
      • The 1-Moving-Average System
      • Drawbacks
      • Which Chart to Use
      • Time Adjustments
      • Signal Adjustments
      • The 2-Moving-Average System
      • Make an Oscillator
      • The 3-Moving-Averages System
      • Cycle Lengths
      • Harmonic Numbers
      • Fibonacci Numbers
      • Trading Rules
      • Granville's Rules
      • Use Moving Averages with Confidence
      • 12 Using Relative Strength For Selection
      • A Brief Profile
      • Calculating and handling Relative Strength
      • Analyzing Relative Strength
      • More Ways to Look at Relative Strength
      • How to Apply Relative Strength
  12. Getting Confirmation with Volume
      • Two Ways to Follow Volume
      • Volume Precedes Price
      • What to Watch
      • Volume in Trends
      • Volume on Breakouts
      • Applying Math to Volume
      • On-Balance Volume (OBV)
      • Upside and Downside Volume
      • Problems with Futures
      • Tick Volume as an Alternative
  13. The Ups and Downs of Oscillators
      • Keep Your Eye on Prices
      • Momentum Oscillators
      • Basic Price Momentum
      • Calculation
      • Overbought and Oversold Indicators
      • Finding Divergences Will improve Your Trades
      • Types of Divergences
  14. What's so Special About RSI?
      • RSI Trading Signals
      • The Failure Swing
      • Signals in Trending Markets
      • Entry
      • Exit
  15. Stochastics
      • The Logic of Stochastics
      • Calculating Stochastics
      • The Stochastic in Operation
      • Signals
  16. A Few Logical Indicators to Follow
      • The Advance/Decline Line
      • Calculating the A/D Line
      • How the A/D Line Works
      • Constructing the A/D Line
      • Signals
      • The Last-Hour Indicator
      • How the Last-Hour Indicator Works
      • Signals
      • The Last-Half-Hour Indicator
      • The Arms Index
      • Constructing the Arms Index
      • Modifying the Arms Index
      • Sentiment
      • What's Being Said
      • What People Are Doing
      • Short-Term Interest Rates
      • Put/Call Ratios
      • Fun with Sentiment
      • The Barron's Confidence Index
      • The logic of BCI
      • Signals
      • A Final Word
  17. Overcoming the Pitfalls; Real-World Technical Analysis
      • Dealing with Change
      • Six investment Guidelines to Follow
      • Eight Guidelines for Successful Trading
  18. Putting it all Together; Case Studies
      • Identify Your Personal Profile
      • Why Money Management is Critical
      • Developing Your Investment Plan
      • Entering a Trade
      • Exiting a Trade
      • A Final Exercise

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