Technical Analysis of Financial Markets


Technical analysis is the useful study of price action, primarily through the use of charts, for the purpose of forecasting future price trends in an effort to determine best entrance and exit choice points. Much of my technical trading is started with john Jay Murphy's book, Technical Analysis of the Financial Markets, NY Institute of Finance, 1991. Although the book may seem older Murphy's book still lays out the basic lexicon of financial trading. Murphy's philosophy of technical analysis is tried and true. It starts with the belief that the market discounts everything. That prices move in one of three trends and history repeats itself.


Murphy spends his time explaining in detail support, resistance and how to draw a trend line and how to recognize price patterns like flags and triangles. Murphy emphasizes the importance of "time frame" when reading charts with solid definitions for bollinger bands, moving averages and fibonacci degrees of time and resistance fractals. My favorite part of the book was probably the review of ancient rice trade price prediction methods going back 1,000s of years in Japan. I still use the book as a reference for basic trading vocabulary. I give the book five big elliot waves for my friend Elliot who doesn't believe in elliot waves.