"Use Stock Market Technical Analysis
To Determine When To Buy (or Sell) Your Shares.
Timing Your Entry (and Exit) Points
Will Determine Your Profits"

Introduction

• Use Stock Market Technical Analysis to be able to spot, at a glance, how each market is trending.  i.e. is it in a Bull trend, a Bear trend, or moving sideways?
  
  
• A chart is not complete without this one piece of information.  Don't even try to fathom out what's going on without it
  
  
• You only need a few key technical indicators - discover what these are right here
  
  
• Decide which kind of chart is best for you. There's only really three you could choose or a combination of all of them. But no more than these three.
  

Warren Buffett says:

"Most people get interested in stocks when everyone else is.  The time to get interested is when no one else is.  You can't buy what is popular and do well"

"Here's Where We Disagree With
Benjamin Graham (and Warren Buffett)"

Most folk avoid Stock Market Technical Analysis.  We know Warren Buffett doesn't put a lot of faith in it.

And here's what Benjamin Graham had to say about it:

"Since our book (Security Analysis) is not addressed to speculators, it is not meant for those who trade in the market.  Most of these people are guided by charts or other largely mechanical means of determining the right moments to buy and sell.  The one principle that applies to nearly all these so-called 'technical approaches' is that one should buy because a stock on the market has gone up and one should sell because it has declined.  This is the exact opposite of sound business sense everywhere else and it is most unlikely that it can lead to lasting success on Wall Street.  In our own stock market experience and observation, extending over 50 years, we have not known a single person who has consistently or lastingly made money by thus 'following the market.'  We do not hesitate to declare that this approach is as fallacious as it is popular."

We appear to agree on the first sentence, but everything after that we are at odds.  We don't know when Graham wrote the above but things have moved on since then, especially the arrival of the technical age.  He may today have a different opinion.

And in any case, his statement of not knowing anyone who has consistently made money from 'Stock Market Technical Analysis' is clearly not correct (William Gann made a fortune using Stock Market Technical Analysis).

But, love it or hate it - and we just happen to love it - it's usefulness will serve you very well.

We firmly take the view that if 'Fundamental Analysis' tells you what to trade, then 'Technical Analysis' tells you when to trade.

Seems like common sense to us.

We come down on the side of the fence that advocates both 'Stock Market Fundamental Analysis' and 'Stock Market Technical Analysis'.

We think 'Stock Market Fundamental Analysis' and 'Charting' are an awesome combination.

"So, What is Stock Market Technical Analysis?"

'Stock Market Technical Analysis' or 'Charting', is the evaluation and display of stock market data, most commonly share price and number of shares traded (i.e. volume).

Some people say that it is a way of predicting future share prices based on historical prices.  We disagree with that definition.  To "predict" future share prices you'd be better off with gypsy Rose Lee's  crystal ball.

But we do think 'Stock Market Technical Analysis' is useful for the following reasons:

• Charts are easier to spot the trend of a market - whether that be up, down or sideways
  
  
• Charts can give you a very good idea of when a market is over-bought or over-sold
  
  
• It's uncanny how share price highs, and lows, occur at the same value (known as resistance and support)
  
  
• Simple mathematic models (Technical Indicators) can highlight possible share price reversals
  
  
• Volume shown on a chart, in relation to the price spread for that period (in our case that will be daily), is an absolute must have.  Charts without volume are like a boat without oars.
  
  
• Other technical indicators derived from charts can give even more precise information
  
  
• Different charts present information in different ways (see below)

In the days of Benjamin Graham, there wasn't the technology that there is now.  Admittedly, chartists existed but all their charts were all hand drawn.  This was extremely time-consuming.

And I'll bet that guys like Jesse Livermore and Richard Wyckoff, although not chartists as such, had a picture inside their head of what their chosen stock looked like.

With today's technology, charts can be drawn in seconds with just the tap of a few keys on a keyboard.  And simple, inexpensive programs can perform what used to be, the un-imaginable.

"What Three Charts Do You Need?"
(There Are Others But We Rarely Use Them)

As mentioned throughout this website, we only study end of day prices (and so should you). 

The intention is to be a long term investor, not a day trader.  And as such, end of day data will be sufficient for your needs. 

The following are the only charts that we use:

1.  The Line Chart

The simplest of charts is a line chart.  This is generally the closing price plotted against time.

See below an example of a simple line chart.

Graph under construction

As you can see, it doesn't reveal too much information.  But it is a clean picture that shows the trend of the share in question.  It is the most basic of charts.  However, just knowing the closing price of a share is only a small part.

2.  The Bar Chart

Next, take a look at the chart below.  It gives us a lot more information.  In fact, four times as much.  Each day, at the close of business, you can access data that shows the movement of the share price throughout the day's trading.

Graph under construction

Each bar will show the following: 

• the open price
• the closing price
• the highest price for the day
• the lowest price for the day

A much better picture than just the closing price.  As you will see later, on another webpage (Bar Charts), the extra information is invaluable. 

But, there is also a fifth piece of information that can be added.  And this makes the information complete.  In fact, this extra piece of information is extremely valuable.

It is the daily volume of shares traded.  See along the bottom of the above chart.  This webpage is but an introduction to the kind of charts that are available.  On a later webpage, you will realise the full importance of having the daily traded volume of shares.

Some people have difficulty reading a bar chart and prefer another kind of chart.  They reckon it's easier on the eye.  This kind of chart is:

3.  The Candlestick Chart

Observe the chart below.  It has exactly the same data as the bar chart but is more pictorial.

Graph under construction

Take a look at the webpage: Candlestick Charts for a more detailed diagnosis.

And the final chart we will take an interest in is a somewhat unusual type of chart.  But some investors use nothing but them.  This final chart is called:

4.  The Point and Figure Chart

See the chart below.  It may look at little odd to you if you've never seen one before.  And can be a little strange at first.  But believe me, they are very popular among some investors. Looks more like a game of noughts and crosses than a financial chart.

Take a look at the webpage: Point and Figure Charts for a more detailed explanation. 

That's enough of an introduction on charts for now.  Click the links above for a more detailed explanation.

The above are the three charts are all that you are ever likely to use. 

Hang on a minute, there were four charts described here!

Don't worry, we don't count the simple Line Chart.  Why would we use a chart with so much information missing?

"What Indicators Are The Best?"

From the charts that you view, various indicators can be used to 'fine tune' investment decisions.

As with the various charts, you don't have to utilise many. But, first up, what is an indicator?

An indicator is a mathematical model derived from information on the above graphs.  Still confused?  Don't be.  You're in the right place.  All will be revealed.

There are literally dozens of indicators.  Some simple.  Some complicated.  Some with bells and whistles.  Guess which ones we use?

We only do simple.

And the simplest indicator of them all is the best.  Some investors use nothing other than this one, simple tool.  And it is called:

The Moving Average (MA)

And it is best explained with an example.  The Bar Chart from above has had a 200 day Moving Average superimposed.  You can see the benefit of this, right?

You may also browse the Glossary tab over on the left.

"Books and Resources About
Stock Market Technical Analysis"

-Stock Market Technical Analysis is a vast subject.  There exists an unending supply of books and software to assist in your success.

We have listed below our selection (and there are many more) that we have.

Enjoy!

Technical Analysis of Stock Trends

Technical Analysis of Stock Trends by Robert Edwards and John Magee

You can order this book by clicking the link below:

How To Select Stocks Using Technical Analysis by Martin Pring

Like a lot of Martin's Books on Stock Market Technical Analysis, they deliver not just a book, but a combination of a workbook and a CD-ROM making them extremely good value for money.

You can get yourself a copy of this really useful resource by clicking on the link just below:

Master The Markets by Tom Williams

In this masterpiece, Tom Williams defines exactly what Stock Market Technical Analysis is all about and more importantly, how to use it.

Tom was a former syndicate trader and had more than twenty years experience trading stocks from both the buyers and the sellers point of view.

You can order Tom's book by clicking the link just below:

Technical Analysis Explained by Martin Pring

Order this classic resource by clicking on the link below:

Momentum Explained by Martin Pring

To order Martin's book - just click on the link below:

Momentum Indicators by Martin Pring

Click on the link below to order this resource:

Trading Systems Explained by Martin Pring

Order now by clicking the link below:

Candlesticks Explained by Martin Pring

Order this work by clicking the link below:

Japanese Candlestick Charting Techniques by Steve Nison

Candlestick Charts are a wonderful pictorial way of displaying price.

Superbly illustrated throughout, this Stock Market Technical Analysis resource comprises of not only charts but sketches giving a thumbnail representation of each minor movement in share price.

This work is much sought after and if you can find a copy, grab one with both hands.  You may find one by clicking on the link below:

The Definitive Guide to Point and Figure by Jeremy du Plessis

Order now by clicking the link just underneath:

Conclusion

We believe that a picture is worth a thousand words.  And a graphical presentation of share prices gives you that.  It shows you the market price of a company share over a chosen time period.

Stock Market Technical Analysis is a huge subject.  But there's no need at all to get carried away with a load of mumbo-jumbo.  Keep it simple.  Everything that you find on this website will be more than enough for you to make informed decisions, yet not too detailed that it confuses you.

Always remember, you are in this for the long haul.  You are not a day trader.  Don't act like one.  In your reading you may come across a lot of "noise" about 'Technical Analysis'.  Ignore it. Stick to the simple stuff.

It is for this reason that you only require end-of-day data.  There's no need to sit glued to your computer screen.  You only need to monitor your 'watchlists' on a regular basis (i.e. daily or even weekly).

By using 'Stock Market Fundamental Analysis', you have identified the shares that interest you.  You now just need to check where the current share price sits.  Is it overbought?  Is it oversold?  Or somewhere in between?

Stock Market Technical Analysis, if used properly, will stop you getting into a share when perhaps, you should be getting out of it (a common mistake among newbies).  See the web page: Accumulation and Distribution.

This webpage has been a short introduction to what is 'Stock Market Technical Analysis'.  The links directing you to other webpages should be followed for a more detailed explanation. But if you want even more information, you'll need to refer to one of the many books on the subject.

Remember, it's not intended that 'Stock Mrket Technical Analysis' be used as a mechanical means of buying, or selling, of a company's shares.  It is used as a guide, so that you don't buy, or sell, at the wrong time.

Also remember, the market is always right.  Not maybe. Not sometimes.  But always.  The price at which you can buy or sell is what your chart is telling you (at the end of day).

Used together with 'Fundamental Analysis' , 'Technical Analysis' will be a formidable  tool in your investing decisions. 

Remember, it's Stock Market Technical Analysis that will tell you when to buy (or sell).

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