Technical Analysis and Stock Market Profits by Richard W Schabacker
There have been many dozens, probably many hundreds, of books written about Technical Analysis. Some books become lauded and are regarded as the bible. In recent years, Murphys Technical Analysis of the Financial Markets is probably the best known. Before that, Edwards and McGees work in the 1950/60s was regarded as seminal.
But the one book that I think really deserves to be regarded as The One True Guide to TA is this book Technical Analysis and Stock Market Profits by Richard W Schabacker. Not one of the names that trips off the tongue in fact, most people have probably never heard of him. I hadnt until a couple of years ago, when I followed a recommendation of a presenter at Index.
But what a treasure trove this book is extensive, in depth discussion about patterns and what they mean; the best discussion of the importance of volume in conjunction with chart patterns that I have ever read. Not just an idle discussion of this looks like a cup and handle, this is a head and shoulders, either. In the vast majority of cases also a discussion about what the pattern represents in terms of the psychology of the markets participants: why the pattern represents a continuation or reversal, how the price and volume are showing the feelings of the people buying and selling the stock.
He also finds time to deal with trading tactics as well, in a very useful chapter at the end, covering things like limit v market orders, selection of stocks and managing risk. Not, admittedly in the depth of the coverage of the TA portion of the book, but in recognition that the Stock Market Profits part is the whole reason for the Technical Analysis part.
So, the books good (Id say great, but lets not quibble). So, its another TA book. Why not go to the origjnals? Why not use Murphy or Edwards and McGee? Or some other guru? Why use this retread instead of the source?
Fair point who needs another Johnny Come Lately book, covering the same old ground as previous masters. Well, maybe no one. One small point though just have a little look inside the front cover at when this book was first published.
1932.
20 years before Edwards and McGee. 50 years before Murphy. This is one of the true fountainheads of TA. Now, admittedly there were a few earlier practitioners, but as far as I can make out, this book (originally published as a series of pamphlets) was the first that really codified the study of TA as a cohesive whole. This is the one on which an awful lot of the rest are based. Edwards and McGee? One of them was Schabackers son in law their book is an (official) rework of Schabackers book. In this book he invents the term support how much more fundamental to TA can you get?
To finish with, a couple of quotes from the back cover: this ground-breaking book a major text on TA; the source material; the original work by the founder of TA. Just a few snippets from some random selection of people off the street.
(Thats respectively, Alexander Elder, John Bollinger, and Welles Wilder who, between them, maybe have some idea what theyre talking about).
The best book on TA ever? Could be!
Does it have fault? No! Well
. OK, yes, a couple of minor ones. No mention of candlesticks at all not popular in the 1930s (well, not in America, anyway). And technology has rather overtaken his views on the usability of short-term charts the data available to modern traders would have been unimaginable to a trader in the 30s, so you wont find a lot on trading using intraday charts, or using Level 2 to scalp trades. But the core TA is as relevant today as it was when Schabacker was inventing and/or disseminating many of the major concepts, 70 years ao.
