Investor's Guide to Charting: Analysis for the Intelligent Investor (Second Edition)
Book Details
- Author: Alistair Blair
- Categories: Technical Analysis, Investing
Quick Summary
Alistair Blair bridges the gap between fundamental and technical analysis for intelligent investors, covering trends, moving averages, classic chart patterns, volume analysis, and the practical application of charting techniques across stocks, options, futures, and indexes.
Detailed Summary
"Investor's Guide to Charting: Analysis for the Intelligent Investor" by Alistair Blair, published by Pearson Education / Financial Times Prentice Hall in its second edition in 2003, is designed to make technical analysis accessible and practical for investors who may come from a fundamental analysis background.
The book opens by addressing the traditional divide between fundamental and technical analysis, arguing that they are "not so divided after all." Blair challenges skeptics who question whether publicly visible chart patterns can generate profits, explaining the psychological and behavioral mechanisms that cause patterns to persist even when widely observed. He also notes that the stock market is not where most chartists are found -- technical analysis is applied more extensively in options, futures, and currency markets.
The introductory material covers the psychological foundations of charting: how buyers and sellers interact, and how fear, greed, and crowd psychology create the patterns that technical analysts seek to exploit. This behavioral framing provides intellectual justification for charting that goes beyond simple pattern recognition.
The core technical chapters cover trends (identification and measurement), trend lines (construction, validation, and interpretation), moving averages (types, parameters, and signals), and the important but often overlooked topic of chart scales (arithmetic vs. logarithmic) and their impact on analysis.
The pattern recognition chapters are structured into reversal patterns (tops and bottoms, including head-and-shoulders, double tops/bottoms, and rounding formations), and continuation patterns (flags, pennants, triangles). Blair provides words of warning about the classic patterns, tempering enthusiasm with practical caveats about pattern failure rates and the importance of confirmation.
Volume analysis receives dedicated treatment, reflecting its importance as a confirming or contradicting signal for price movements. The book's approach throughout maintains a balance between the systematic presentation of charting techniques and honest acknowledgment of their limitations, making it particularly suitable for investors who want to add charting to their analytical toolkit without abandoning critical thinking.
