Im new and don't know where to start

conquer1

Ive just finished reading my 3rd book on TA i have no clue as to where to start. right now im looking to be able to study charts to learn how to use them in the best way possible. any ideas on where i can start to study stock charts or should i just pick random charts and start drawing trend lines flags triangles ect thanks in advanced

markd

I think patterns are a difficult way to get into TA. They can take a long time to develop and whether they are really "there" can be subjective. Also, it can be difficult to go back and find enough examples to get familiar with how they work because you can't scan for them very easily, if at all.

You might want to start by exploring some the indicators in Chart School. The advantage of an indicator over a pattern is, you definitely know when it's giving you a signal to do something (even if you don't want to - you can't dispute whether the signal occurred, as you can with a pattern). Also, it's much easier to find past examples by scanning for indicator signals - or just finding them by eye - to see when they work and when they don't. Some of the most common indicators might be the best place to start - MACD, RSI, Stochastics. You might want to play with the parameters to see how the signals change. Then you might want to add a second indicator or overlay, like moving overages, to filter the signals from the first.

When you have explored a little, you will get a better idea of what the risks and rewards are - how many signals you get, how many work out and how much they pay, versus how many don't work out, and how much they cost. You can keep a table in Excel or by hand to keep track.

Then you want to think about questions like, how much time do you have for analyzing trades, how much information do you need to make a commitment, or end one, can you trade during market hours or only after hours, and what your trading temperament might be - are you happy to watch and wait for trades that line up perfectly, and then wait some more while they develop, or do you want to play every signal every day come what may - or are you somewhere in the middle. Your strategy has to fit your temperament, or you won't follow it. One way is not better than another, it just has to be right for you.

By the way, books can be useful. But don't expect to find THE answer in any of them, because there is no ONE answer. You will learn more, faster, by doing your own research on lots of charts, and believing what your own work tells you, - in other words, writing your own answers - than by reading so-called expert after expert. There are NO short cuts to knowledge.

Cush

I have read a number of books on TA. Some of them were good investments of my money and time, some were not. For me, the best book (and one that is still on my desk, always) was "Technical Analysis of the Financial Markets" written by John J. Murphy who is now part of StockCharts.com.

I think Mark's suggestions above are very good and very well explained.

From my experience, which goes back some years before Chip created his great site, I began with Moving Averages and their relationship to each other and to price. For the most part now, I still use 20, 50, and 200 Exponential Moving Averages and their relationship to each other and price as part of my decision making.

Good luck. With TA, the learning never ends. It can be interesting and fun.

Cush

conquer1

Thanks to both of you for your answers this has been a real journey for me an im trying to learn as much as possible i have have actually read the book by Murphy it was a good read in my opinion and i see now this is going yo be a ong hard road but im ready i believe

markd

One book I would recommend is Trade Your Way to Financial Freedom by Van Tharp. There are two editions - either one is OK. You might be able to find them used. The first few chapters lay out a pretty good road map for what you have to consider and do to master trading. Especially important are the parts about money management. The later chapters talk about trading systems - you do need a method, but I'm not sure it has to be a rigid system. A second book I like is Three Skills of Top Traders by Hank Pruden. It does a good job of explaining the Wyckoff approach to understanding what makes the market behave as it does - which to me makes more sense than a mechanical systems approach. On this site, you can find Bruce Fraser's blog, which is also a good explanation of Wyckoff. But get the book.