Charting Made Simple E-Book

Roger Kinsky

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 276

Veröffentlichungsjahr: 2011

Beschreibung

A straightforward guide that answers investors questions and helps them develop their own charting system The fifth book in the Wrightbooks "Made Simple" series, this book gives investors the answers they need to understand and use charting without the expense of a proprietary program. It explains such commonly used charting tools as the moving average indicator and Bollinger brands and shows readers how to combine tools and techniques into a coherent charting system that works for them.

Leseprobe

CHARTING MADE SIMPLE: A BEGINNER'S GUIDE TO TECHNICAL ANALYSIS

Table of Contents

Chapter 1: Introducing technical analysis

Technical analysis

Technical analysis versus fundamental analysis

Technical analysis and market sentiment

How reliable is technical analysis?

Trading instruments

Trading terminology

Profiting in bull and bear markets

Trading versus investing

Investor/traders and trader/investors

Return on capital

Taxation considerations

Stock codes

Accessing technical analysis tools

Charting sites

Choosing a broker

Chapter summary

Chapter 2: Charts

Price charts

Types of price charts

What type of chart should I use?

Chapter summary

Chapter 3: Trends

Trends

Identifying trends: best fit method

Identifying trends: high–low method

Channels

Support and resistance levels

Wedges

Trend identification in a point and figure chart

Trend trading strategies

Interpretation of trends

Chapter summary

Chapter 4: Patterns

Chart patterns

Trend changes

Trend change patterns

Other patterns

Fibonacci ratios

Trading strategies using patterns

Visual interpretation

Chapter summary

Chapter 5: Moving averages

The purpose of moving averages

The principle of moving averages

Moving average time periods

Single moving average strategies

Two moving average strategies

Multiple moving averages

Chapter summary

Chapter 6: Moving average convergence divergence

Moving average difference

The MACD indicator

MACD trading strategies

MACD time lag

Using the MACD

Chapter summary

Chapter 7: Momentum

Physical momentum

Sharemarket momentum

Momentum and trends

Momentum indicator

Momentum trading strategies

Advantages and limitations of the momentum indicator

Chapter summary

Chapter 8: Relative strength index

A measure of momentum

Interpreting the RSI

RSI trends

Trading signals using the RSI

Chapter summary

Chapter 9: Volume

Volume recap

Importance of volume

Volume spikes

Volume and liquidity

Volume and trend strength

Smart money and copycat trading

Market depth screen

Equi-volume charts

On balance volume

Price–OBV divergence

Reliability of volume indications

Chapter summary

Chapter 10: Bollinger bands

Normal distribution

Bollinger band calculation

Charting Bollinger bands

Using Bollinger bands as a trading tool

Bollinger bands and volatility

Share price volatility

Trends and trend change indications

Bollinger bands and overbought/oversold conditions

Bollinger band trading signals

Chapter summary

Chapter 11: Money flow

The money flow index

Chaikin money flow

Twiggs money flow

A flaw with money flow indices

Chapter summary

Chapter 12: Your charting system

Creating a trading/investing plan

Technical analysis systems

Charts, indicators and parameters to include

Chapter summary

Appendix: Chart interpretations

Roger Kinsky

First published 2011 by Wrightbooks

an imprint of John Wiley & Sons Australia, Ltd 42 McDougall Street, Milton Qld 4064

Office also in Melbourne

Typeset in 11/13.4 pt Berkeley

© Roger Kinsky 2011

The moral rights of the author have been asserted

National Library of Australia Cataloguing-in-Publication data:

Author: Kinsky, Roger.

Title: Charting made simple: a beginner’s guide to charting success / Roger Kinsky.

ISBN: 9780730375760 (pbk.)

Notes: Includes index.

Subjects: Investment analysis. Stocks.

Dewey Number: 332.642

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher at the address above.

Printed in China by Printplus Limited

Cover design by Peter Reardon, Pipeline Design <www.pipelinedesign.com.au>

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Disclaimer

The material in this publication is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based upon the information in this publication.

Acknowledgements

I would like to thank CommSec and Incredible Charts for giving permission to reproduce charts and web pages included as examples in this book.

Preface

Following on from the positive reception by readers of my book Shares Made Simple, my publisher and I decided that the ‘made simple’ paradigm could ideally be applied to charting (or technical analysis). Technical analysis can be an elusive and often difficult-to-understand method shrouded in a certain amount of mystique that deters many would-be traders or investors from using it. That’s a great pity, as technical analysis can improve profitability when used on its own or in conjunction with fundamental analysis by both longer term investors and shorter term traders.

My aim is to explain the most important aspects of technical analysis in the simplest possible way, so as to make the book easy to understand for those who hitherto have only tinkered with the method or avoided it altogether. Although the book is aimed primarily at beginners, I trust that more experienced readers may obtain some new insights of value to them.

The book contains many solved examples to highlight the principles. To allow readers to practise their skills and reinforce understanding some examples are in the form of self-test exercises where my interpretation is given in the appendix rather than in the body of the chapter. There’s an element of subjectivity in technical analysis that’s an inherent part of the method so interpretations can vary and there is no single correct solution. I’ve included many tips and suggestions, but please remember that they’re my personal preferences and they mightn’t always be appropriate for you so you need to use your own discretion. In addition, bear in mind that because technical analysis is not an exact science, tools and indicators don’t always give reliable outcomes and even with the best interpretation not all your trades will be profitable. The aim is to improve the likelihood of success and maximise your overall trading profitability.

There are well over 50 different charting tools and indicators available, so clearly I had to decide which to include and which to exclude. Because CommSec is by far the most widely used online trading site in Australia, I decided to include all the tools and indicators available on this site, with the exception of the stochastic indicator. I excluded this indicator as I feel it’s a rather advanced tool suitable for an experienced technical analyst and not really appropriate in an introductory text. In some cases I’ve included some tools or indicators not available on the CommSec site when I think these are important and worth including.

Every effort has been made to ensure the book is free of errors but in the real world perfection is difficult to achieve. I welcome feedback from readers who may have any constructive comments or suggestions for improvement. Please email me at <[email protected]> or <[email protected]> or contact John Wiley & Sons, who will forward any correspondence to me. I will promptly reply to any emails or letters I receive.

Finally, I’d like to wish you every success when using technical analysis with your share investing or trading, and I trust that this book will assist you in achieving good outcomes.

Roger Kinsky

Woollamia, NSW

January 2011

Chapter 1: Introducing technical analysis

In this chapter I’ll describe technical analysis and outline its purpose and the reasons why you should use it, as well as the limitations of the method. I’ll also show you how to calculate profitability and how you can set yourself up so you can start using technical analysis. In later chapters I’ll describe in more detail technical analysis tools and techniques you can consider using.

Technical analysis

Technical analysis is the analysis of trade prices to detect historical trends and trend changes to allow you to predict the most likely future scenario. The best way to analyse price action is with a chart, so technical analysis is also known as charting.

The purpose of technical analysis

Historical analysis is interesting, but is of little use unless you can use the analysis to look forward as well. Of course no-one can predict the future, but your aim in using technical analysis is to forecast the most likely (or probable) future price moves and to identify the best times to buy or sell. You’re not dealing with certainty or aiming for infallibility; rather you’re trying to swing the probabilities in your favour. That’s to say, the fundamental purpose of technical analysis is to give you a trading edge allowing you to maximise trading profits and minimise losses.