Technical analysis of the futures markets : a comprehensive guide to trading methods and applications

Designed to meet the need for a logical, sequential reference on the subject, this book describes—for beginners and more experienced traders alike—the concepts of technical analysis and their applications. In a down-to-earth style, John J. Murphy interprets the role of technical forecasters and explains how they apply their techniques to the futures markets.

The book starts with a discussion of the rationale for and premises of technical analysis. In demonstrating how to track market behavior, it illustrates the full gamut of methodologies—from the Dow Theory’s first application, almost a century ago, to the latest computer technology.

Building in the basic concepts of charting theory, the book shows how to construct daily bar and point-and-figure charts and demonstrates the uses of longer-range continuation charts in revealing trend and price patterns. You will gain an understanding of support and resistance, key reversal days, head-and-shoulder pattern, flag and pennant patterns, Elliot Wave theory, and the analysis of volume and open interest as indicators of trend changes. Moving averages and oscillators also are explained and illustrated.

Cyclic theory, the chartist’s valuable tool for factoring in the dimension of time in analyzing trends and patterns, permits the analyst to predict how the market is moving, how far it is likely to go, and when a move is likely to end. Extensive chart examples (the book incorporates some 400 illustrations, most of them real-life examples) show you how time cycles enhance the effectiveness of the various technical tools.

The book concludes with an especially useful discussion of the respective roles, in the trading process, of analysis, timing, and money management. It also cites relevant bibliographies—both at the end of each chapter and at the book’s end. Appendices include concise introductions to spread trading and relative strength, the trading of options, and the theory of W.D. Gann.