Book Review > Charting made simple

The full title on the cover of this book is “A beginner’s guide to charting success – Charting made simple – simple, easy to understand strategies anyone can use for success” and I cannot agree more (although I can’t vouch for the success bit yet!).  This book is the best introductory book regarding technical analysis that I have read.  It is easy to understand, written in an easy to read style and avoids the more complicated technical analysis that has put me off some other books I’ve read/tried to read.

The book is in 12 chapters, an introduction, a chapter each on the types of charts, trends and patterns, a chapter each on seven technical indicators and a chapter on how you can use these indicators when developing your own plan.

The first three chapters are introductory and assume you know very little about share charts.  The technical indicator chapters cover moving averages, moving average convergence divergence (MACD), momentum, relative strength index (RSI), volume, Bollinger bands and money flow.  The final chapter on developing your own charting system is not prescriptive nor very detailed, but provides an outline of what to consider and how to decide your strategy.  Another useful book could also be written just on the issues in this chapter alone.

What I particularly liked about the technical indicator chapters were:

• the use of free data sources viz. Commsec and Incredible Charts;
• each indicator is explained in simple terms;
• there are tips which summarise important points;
• example charts are easy to read and explained;  and
• there is a useful summary at the end of each chapter.

I have written this after attending the AIA Conference where I listened to both Daryl Guppy and Colin Nicholson give talks on how one can use technical analysis for longer-term investing.  This book covers very similar indicators to those discussed by Daryl Guppy  and would be a very useful tool for the fundamental investor who wishes to overlay some technical indicators in order to make better investment decisions.  In addition it also reminds us that we also need to manage both capital and risk (although this is not covered in detail).

As mentioned in the first paragraph, this is the best introductory technical analysis book I have read and covers most of the basic indicators which are more than adequate for the longer-term investor.  I will certainly be on the look out for other books by the author – these include Teach Yourself About Shares, Shares Made Simple and Online Investing on the Australian Sharemarket (some of which cover items mentioned in Chapter 12 but not included in detail).