The Visual Investor

Are you interested in learning technical analysis of ETF charts but not sure how to start? Then have I got a book for you! “The Visual Investor: How to Spot Market Trends” by John J. Murphy.

John Murphy is a former technical analyst for CNBC - but don’t hold that against him - with over 40 years of market experience. He is the face of StockCharts.com and its technical analysis charts and tools, and the book mentions this without degenerating into a hard-sell commercial. But most importantly for our purposes, Murphy knows how to write in understandable and interesting ways without being simplistic.

This book assumes you start from a zero knowledge base and helps you built from there. But if you already know technical analysis then the book’s explanations can help you fit the pieces together more clearly.

Murphy explains that charts work for two reasons. First, they reflect the market’s assessment of the value of a given stock in a daily report card. There’s no such thing as a market moving for the wrong reasons. The market is always right, and it’s up to us to get in sync with it. And second, markets trend. Murphy says if you don’t believe that, then look at a chart and if you still don’t believe it then buy a stock that is falling!

The book starts out by explaining trends, support and resistance, timelines, trend lines, channel lines, and retracements, then moves on to chart types, volume analysis and point & figure charts. The part of the book on indicators doesn’t try to list every indicator and oscillator ever dreamed up. It concentrates on the most commonly used ones and thoroughly explains them, and how and why they work. There are whole sections on moving averages, RSI and stochastics and how to combine the two, MACD and ADX.

The book explains sophisticated ideas like market linkage and market breadth in understandable terms. And the second edition (which was copyrighted in 2009) even has a section on ETFs!

If you’re interested in technical analysis and want just one book to learn about it, this may be your book!

Lady