Technical analysis and the active trader (McGraw-Hill Trader’s Edge Series)

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9780071467919: Technical analysis and the active trader (McGraw-Hill Trader’s Edge Series)

Exposing the unreliability of technical analysisTechnical analysis is one of the most widely used and taught methods of financial markets analysis. It is becoming particularly popular with time poor retail traders who are taught that chart patterns, trend lines, indicators etc offer quicker ways to make trading decisions. But how reliable are these methods?
Technical Analysis and the Active Trader exposes the flaws and unreliability of technical analysis. Using examples from real market scenarios, robust independent studies and behavioral finance, technical Analysis and the Active Trader shows how and why traders will struggle to be profitable using charts and indicators.

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From the Author:

When I left the world of professional trading rooms and trading floors after 14 years as a senior trader in London I became exposed to the world of retail traders for the first time.

What struck me was the use of trading and analysis techniques that I had not used or seen used by professional traders during my career. Chief among these is technical analysis.

In the industry technical analysis is more often used by the sell side - brokers and analysts rather than traders.

I was also intrigued by the sales techniques of those who were teaching technical analysis.

I wanted to find out if I was missing anything by not using technical analysis so I spent nearly two years researching. I read dozens of independent studies into many forms of charting and technical analysis; I attended seminars run by technical analysis educators; I looked to what we have learned from behavioral finance about decision making; and I followed real market examples.

It became clear that technical analysis was no where near as reliable as its supporters claim. The information suggested that most who use it will fail.

With this book I want to show a realistic picture of technical analysis. As well as detailing its unreliability, I explain why it is flawed; some of the key underlying assumptions simply do not stack up to how markets really work.

In Technical Analysis and the Active Trader you will see the reality of technical analysis for most who use it. The lessons learned will help you with your own trading.

From the Back Cover:

Go beyond the tired rules of technical analysis to uncover a wider range of profitable opportunities

Technical analysis can be dangerously unreliable, as most technicians will reluctantly attest. Technical Analysis and the Active Trader presents an entirely new approach to the markets, one that combines traditional technical tools with fundamental analysis, behavioral finance, and more to help you understand what makes prices move.

Author Gary Norden is a veteran professional trader, as opposed to a theory-driven mathematician. In Technical Analysis and the Active Trader, Norden examines technical analysis from a trader's perspective to reveal:

  • Flaws in bedrock assumptions that form the basis of technical analysis, and strategies you can follow to overcome those flaws
  • Findings of modern behavioral finance, and how to use them to gain valuable insights into the decision-making patterns of other traders
  • Two trading techniques that will consistently signal when you are about to make a bad decision-and what you need to know to implement each

Decades-old technical analysis strategies are no match for increasingly complex markets and traders. Technical Analysis and the Active Trader shows you how to bolster your program by integrating technical, fundamental, and psychological analysis into a well-rounded investment approach that plays off the strengths of contemporary markets, as opposed to the wishful thinking of obsolete technical analysis.

Improve your trading with this dynamic combination of fundamentals, technicals, behavioral finance, and commonsense

Veteran traders know the perils of relying on easy answers. They know that technical, chart-based indicators and unproven rules of thumb might lead to the occasional lucky call--but they will never lead to long-term market success.

Technical Analysis and the Active Trader introduces you to a powerful trading approach that integrates knowledge of fundamentals and trader psychology with specific technical indicators for a sensible, structurally sound trading program. This eye-opening book breaks through the numerous fallacies of technical analysis to show you how to truly understand markets, companies, and other traders, limiting your risks while giving you a broader sense of which direction markets and traders are likely to head next.

This straightforward rulebook will give you the knowledge you need to uncover lower-risk opportunities and get the most from those opportunities. It reveals strategies that savvy traders use to:

  • Scalp or flow trade business entering the market, behaving less like a gambler and more like the “house”
  • Use the biases and heuristics of behavioral finance to understand trader psychology and improve your own decision making
  • Determine why traders are forecasting a certain outcome, and trade against them if the facts warrant
  • Track bond market performance to either support or disconfirm stock market trends
  • Determine when good or bad news has already been priced in by traders, and go long or short based on facts instead of hunches
  • Link stop loss levels to your preset profit targets as opposed to irrelevant past performance numbers
  • Weigh up possible outcomes of a trade, then chose your positions on the side that offers the least resistance to a positive outcome

The majority of technical trading instructors and guides would have you believe that trading is a clear-cut process of unswervingly adhering to rote charts and signals. If that ever worked, it certainly doesn't anymore. Technical Analysis and the Active Trader adapts the traditional claims of chartists and technical analysts to new research and changing realities, showing you how to use all available market data to make informed, intelligent, and profitable trading decisions.

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