Taming The Untamed
- Thread starter Shantala
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Once again, I am going through "Technical Analysis of Stock Trends" by Robert Edwards and John Magee. Each time I go through this book, I learn something new. Nowadays, I am of the opinion that every book on stock market technical analysis is based on this book or the same ideas are represented and named in different forms in other books.
In following few posts, I am presenting my understanding of this bible of technical analysis.
In following few posts, I am presenting my understanding of this bible of technical analysis.
Quoting some sentences from Foreword/Preface.
When you enter the stock market, you are going into a competitive field in which your evaluations and opinions will be matched against some of the sharpest and toughest minds in the business. You are in a highly specialized industry in which there are many different sectors, all of which are under intense study by men whose economic survival depends upon their best judgment. You will certainly be exposed to advice, suggestions, offers of help from all sides. Unless you are able to develop some market philosophy of your own, you will not be able to tell the good from the bad, the sound from the unsound.
Buying systems is buying trouble. Everyone should find his own method
Purpose of this book is to learn from history and the past so as to be better able to deal with the present and the future.
by following the methods and principles taught in this book he can put himself on the right side of the probabilities.
No Ayatollah exists to issue the final fatwa as to whether the signal is valid.
As Freud mapped the human psyche, so have Edwards and Magee mapped the human mind and emotions as expressed in the financial markets.
the inherent nature of a competitive market does not change very much over the years, and that “the same old patterns” of human behavior continue to produce much the same types of market trends and fluctuations.
Through his technical work, John Magee emphasized these three principles:
1. Stock prices tend to move in trends.
2. Volume goes with the trends.
3. A trend, once established, tends to continue in force.
John urged investors to go with the trend, rather than trying to pick a bottom before it was completed, averaging down a declining market. Above all, and at all times, he refused to get involved in the game of forecasting where “the market” was headed, or where the Dow–Jones Industrial averages would be on December 31st of the coming year. Rather, he preached care in individual stock selection regardless of which way the market “appeared” to be headed.
But what is trend, why to trade trend, and how to trade trend...
When you enter the stock market, you are going into a competitive field in which your evaluations and opinions will be matched against some of the sharpest and toughest minds in the business. You are in a highly specialized industry in which there are many different sectors, all of which are under intense study by men whose economic survival depends upon their best judgment. You will certainly be exposed to advice, suggestions, offers of help from all sides. Unless you are able to develop some market philosophy of your own, you will not be able to tell the good from the bad, the sound from the unsound.
Buying systems is buying trouble. Everyone should find his own method
Purpose of this book is to learn from history and the past so as to be better able to deal with the present and the future.
by following the methods and principles taught in this book he can put himself on the right side of the probabilities.
No Ayatollah exists to issue the final fatwa as to whether the signal is valid.
As Freud mapped the human psyche, so have Edwards and Magee mapped the human mind and emotions as expressed in the financial markets.
the inherent nature of a competitive market does not change very much over the years, and that “the same old patterns” of human behavior continue to produce much the same types of market trends and fluctuations.
Through his technical work, John Magee emphasized these three principles:
1. Stock prices tend to move in trends.
2. Volume goes with the trends.
3. A trend, once established, tends to continue in force.
John urged investors to go with the trend, rather than trying to pick a bottom before it was completed, averaging down a declining market. Above all, and at all times, he refused to get involved in the game of forecasting where “the market” was headed, or where the Dow–Jones Industrial averages would be on December 31st of the coming year. Rather, he preached care in individual stock selection regardless of which way the market “appeared” to be headed.
But what is trend, why to trade trend, and how to trade trend...
WHC Bassetti ,the editor and co author of - Technical analysis of stock trends - Edwards & Magee posts, his views on the US MKTs here ...
although its paid, the charts are open to all for viewing ..
http://www.edwards-magee.com/
Of interest is his application of basing points on the US MKT ...
Thought of mentioning here for those who are not aware ..
although its paid, the charts are open to all for viewing ..
http://www.edwards-magee.com/
Of interest is his application of basing points on the US MKT ...
Thought of mentioning here for those who are not aware ..
What is trend...
Everyone here knows Dow theory, in which trend is defined with respect to HHs/HLs and LHs/LLs.
But many traders forget other aspects of trend, one of which is .....(as mentioned in Edwards and Magee)
After a move to a new Minor Top, a stock may be expected to react: (1) about 40% to 50% of that move, (2) to the Basic Trendline, and (3) to the previous supporting Minor Top. Your purchase, then, will be based on a consideration of all three factors.
Where there is a downward correction, it is likely to come down to or near the Top of the last previous Minor High (support). Also, and often at the same time, the corrective move will carry down to the Basic Trendline drawn through two or more previous Minor Bottoms; or to the “parallel”; or to a trendline drawn through the last two or more previous Minor Tops. If the corrective move is horizontal, it is likely to run out until it meets one of these lines.
An army, which has pushed forward too rapidly, penetrated far into enemy territory, suffered casualties, and outrun its supplies, must halt eventually, perhaps retreat a bit to a more easily defended position and dig in, bring up replacements, and establish a strong base from which later to launch a new attack. In the military parlance with which we have all become more or less familiar these past few years, that process is known as consolidating one’s gains.
Everyone here knows Dow theory, in which trend is defined with respect to HHs/HLs and LHs/LLs.
But many traders forget other aspects of trend, one of which is .....(as mentioned in Edwards and Magee)
After a move to a new Minor Top, a stock may be expected to react: (1) about 40% to 50% of that move, (2) to the Basic Trendline, and (3) to the previous supporting Minor Top. Your purchase, then, will be based on a consideration of all three factors.
Where there is a downward correction, it is likely to come down to or near the Top of the last previous Minor High (support). Also, and often at the same time, the corrective move will carry down to the Basic Trendline drawn through two or more previous Minor Bottoms; or to the “parallel”; or to a trendline drawn through the last two or more previous Minor Tops. If the corrective move is horizontal, it is likely to run out until it meets one of these lines.
An army, which has pushed forward too rapidly, penetrated far into enemy territory, suffered casualties, and outrun its supplies, must halt eventually, perhaps retreat a bit to a more easily defended position and dig in, bring up replacements, and establish a strong base from which later to launch a new attack. In the military parlance with which we have all become more or less familiar these past few years, that process is known as consolidating one’s gains.
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