Readers reviews of Getting Started in Technical Analysis

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Bob Forster

This new text on Technical analysis is a welcome addition to the literature for serious students of the subject and forms part of the "Getting Started " series of texts devoted to the financial markets.

Schwager has divided the book into four sections, more, it seems, to encompass the diversity of his extensive practical trading experience and personal contacts in the markets, rather than offer a tightly structured textbook.

Section one covers the basic concepts of technical analysis; trend lines, support and resistance, chart patterns, various oscillators and the like.

Section two examines various trading issues, including stop loss points, exit criteria and for Schwager, his concept of " the importance of failed chart signals" as the precursor of major changes in trends. This section also contains an interesting interactive tutorial approach where readers can test their analysis against developing chart action.

The third section of the book looks at trading systems, their structure, design, testing and, most important of all, their limitations.

In the final section of the book, the author looks at practical trading guidelines. This encompasses the development of the trader's personal trading philosophy, choice of trading style, market choice and appropriate risk controls. Schwager draws on his own personal experience and the insights of the many top traders he interviewed for his earlier "Market Wizard" books. These views have been distilled to create a compendium of the "do's and don'ts" of trading. The book is worth reading for this section alone.

While the book purports to be an introductory text in technical analysis, it is definitely a meaty read and better suited to those who are already familiar with the concepts from other texts.

On the down side, from the point of view of Australian readers, is the widespread use of U.S. Futures charts as examples. Further, there is a striking difference between this text and those written from the perspective of the Australian market, and that concerns the relevance of volume. Australia is a small market in world terms. For traders chasing volatility in highly leveraged stocks, volume fluctuations form a critical part of the equation in evaluating their likely performance in the local market. Schwager's omission of 'volume' as an issue in trading (it does not even rate a mention in the comprehensive index or glossary) is more of a reflection about the size of the U.S. market compared to our local one.

This book will form a useful addition to any technical trader's library, but be aware that many of the principles espoused are drawn from the particular context of U.S. equity and futures markets.

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