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Charting Made Easy

by John J. Murphy (2000)

Quick summary -- an in-depth PhD-level extended summary (10-30 pages) for this book is coming soon.

Charting Made Easy

By John J. Murphy

Quick Summary

John J. Murphy, one of the most respected names in technical analysis, provides a concise, accessible introduction to chart analysis. The book covers the essentials of charting including bar charts, support and resistance, trendlines, reversal and continuation patterns, moving averages, oscillators, and volume interpretation. Designed as a quick-start guide, it distills Murphy's decades of expertise into a compact format suitable for beginners and intermediate traders.

Executive Summary

"Charting Made Easy" is a compact primer on technical chart analysis from John J. Murphy, author of the acclaimed "Technical Analysis of the Financial Markets." The book covers the essential building blocks of chart reading in a concise, visual format: chart types, trend identification, support and resistance, reversal patterns (head and shoulders, double tops and bottoms), continuation patterns (triangles, flags, pennants), price gaps, volume analysis, moving averages, and oscillators. Murphy also covers the top-down approach to market analysis, working from major averages down through sectors to individual stocks.

Core Thesis

Charts reveal price trends, and the primary task of the technical analyst is to identify these trends as early as possible and ride them until evidence suggests they are changing. All the tools of technical analysis -- patterns, indicators, volume -- serve this single purpose of trend identification and confirmation.

Key Concepts and Terminology

  • Trendlines: Lines connecting successive lows (uptrend) or highs (downtrend)
  • Support and Resistance: Horizontal price levels where buying or selling concentrates
  • Moving Averages: Average price over a specified period, smoothing out short-term fluctuations
  • MACD: Moving Average Convergence Divergence, a momentum indicator
  • Bollinger Bands: Volatility-based envelopes around a moving average
  • On-Balance Volume (OBV): A cumulative volume indicator that helps confirm price trends

Practical Applications

  1. Use the top-down approach: analyze the overall market first, then sectors, then individual stocks
  2. Draw trendlines connecting significant lows in uptrends and highs in downtrends
  3. Watch for breakouts from well-defined patterns to signal new trend moves
  4. Use multiple time frames to gain both long-term and short-term perspective
  5. Confirm price moves with volume analysis
  6. Use oscillators to identify overbought and oversold conditions

Critical Assessment

Murphy succeeds in making chart analysis accessible without oversimplifying. The book is an ideal starting point for newcomers to technical analysis and a useful refresher for experienced traders. Its brevity is both a strength (accessible, focused) and a limitation (lacks depth on any single topic). For comprehensive coverage, readers should progress to Murphy's full-length "Technical Analysis of the Financial Markets."

Conclusion

"Charting Made Easy" delivers exactly what its title promises: a clear, concise introduction to the essential tools of chart analysis from one of the field's most trusted authorities.