Power Tools for Traders

The best times to buy in the market, of course, are when longer-term waves and shorter-term waves are simultaneously reaching the lows of their cycle and when the typical investor is pessimistic, more apt to sell in panic than to recognize the opportunities in price weaknesses taking place.

There are two significant market indicators. One of these is MACD, or the moving average convergence-divergence indicator, that I developed 30 years ago. The other is the moving average trading channel, which is a way of viewing patterns of price movement within "trading channels" that can help investors accurately forecast forthcoming market action (over the long term and short term, depending on the trading band constructed). Technical Analysis devotes a full chapter to each of these technical techniques. Investors will read and learn what I am often requested to present at lectures and seminars that attendees pay hundreds of dollars to attend.

Technical Analysis was prepared largely to assist investors in accurately deciding when to buy and when to sell, most often by careful observation of the patterns and actions of the stock market. The largest portion of this book is devoted to these ends.

However, I also included a useful and significant section that describes an extremely powerful way to select mutual funds for purchase (as well as for sale) on the basis of not only technical tools but also the volatility (risk level) and relative performance of each fund compared with those the total mutual fund universe.

The methodology employed, which does not require continuous short-term trading, is similar to strategies that my firm employs to select mutual funds for clients and similar to strategies employed by some of the most successful market letters and money managers in the country. Investors will learn everything necessary to apply the techniques involved in their own portfolio without recourse to money managers.

Although I cannot, of course, guarantee that the techniques for market-timing and for the selection of mutual funds will work as well in the future as in the past, I do believe that readers of this book will find tools such as the Nasdaq/New York Stock Exchange relative strength indicator, the intermediate monetary filter and the triple momentum Nasdaq Index trading model to be not only interesting but also practical.