Technical Analysis of the Futures Markets by John Murphy

Superb book, exceptionally well written. Both the most comprehensive book on and a standard reference for technical analysis. Provides clear and lucid coverage of all major analytical techniques. Major emphasis on charting as a basis for price forecasting and trading. Selected by Market Technicians Association as one of two basic texts for those wishing to qualify as a Chartered Market Technician. 

This book is designed to meet the need for a logical, sequential reference on the subject, this book describes-for beginners and more experienced traders alike---the concepts of technical analysis and their applications. In a down-to-earth style. John J. Murphy interprets the role of technical forecasters and explains how they apply their techniques to the futures markets.

The book starts with a discussion of the rationale for and premises of technical analysis in demonstrating how to track market behavior, it illustrates the full gamut of methodologies---from Dow Theory's first application, almost a century ago, to the latest computer technology.
Building on the basic concepts of charting theory, the book shows how to construct daily bar and point-and-figure charts and demonstrates the uses of longer-range continuation charts in revealing tend and price patterns. You will gain an understanding of support and resistance, key reversal days, head-and-shoulders patterns, flag and pennant patterns, Elliott Wave theory, and the analysis of volume and open interest as indicators of trend changes Moving averages and oscillators of trend changes. Moving averages and oscillators also are explained and illustrated.

Cyclic theory, the chartist's valuable tool for factoring in the dimension of time in analyzing trends and patterns, permits the analyst to predict how the market is moving, how far it is likely to go, and when a move is likely to end. Extensive charts examples show you how time cycles enhance the effectiveness of the various technical tools.

The book concludes with an especially useful discussion of the respective roles, in the trading process, of analysis, timing, and money management. It also cites relevant bibliographies---both at the end of each chapter and at the book's end.

Contents

Introduction, xiii

Acknowledgments, xix

1 Philosophy of Technical Analysis

INTRODUCTION,
PHILOSOPHY OR RATIONALE,
TECHNICAL VERSUS FUNDAMENTAL FORECASTING,
ANALYSIS VERSUS TIMING,
FLEXIBILITY AND ADAPTABILITY OF TECHNICAL ANALYSIS,
TECHNICAL ANALYSIS APPLIED TO DIFFERENT TRADING MEDIUMS,
TECHNICAL ANALYSIS APPLIED TO DIFFERENT TIME DIMENSIONS,
ECONOMIC FORECASTING,
TECHNICIAN OR CHARTIST?
A BRIEF COMPARISON OF TECHNICAL ANALYSIS IN STOCKS AND FUTURES,
SOME CRITICISMS OF THE TECHNICAL APPROACH,
RANDOM WALK THEORY,
CONCLUSION,

2 Dow Theory,

INTRODUCTION,
BASIC TENETS,
THE USE OF CLOSING PRICES AND THE PRESENCE OF LINES,
SOME CRITICISMS OF DOW THEORY,
SUMMARY,
CONCLUSION,

3 Chart Construction,

INTRODUCTION,
TYPES OF CHARTS AVAILABLE,
ARITHMETIC VERSUS LOGARITHMIC SCALE,
CONSTRUCTION OF THE DAILY BAR CHART: PRICE, VOLUME, AND OPEN INTEREST,
VOLUME AND OPEN INTEREST,
HOW TO PLOT VOLUME AND OPEN INTEREST IN GRAIN MARKETS,
PERSONAL CHARTS VERSUS A CHART SERVICE,
WEEKLY AND MONTHLY BAR CHARTS,
CONCLUSION,

4 Basic Concepts of Trend,

DEFINITION OF TREND,
TREND HAS THREE DIRECTIONS,
TREND HAS THREE CLASSIFICATIONS,
SUPPORT AND RESISTANCE,
TRENDLINES,
THE FAN PRINCIPLE,
THE IMPORTANCE OF THE NUMBER THREE,
THE RELATIVE STEEPNESS OF THE TRENDLINE,
THE CHANNEL LINE,
PERCENTAGE RETRACEMENTS,
SPEED RESISTANCE LINES,
REVERSAL DAYS,
PRICE GAPS,
SUMMARY,

5 Major Reversal Patterns,

INTRODUCTION,
PRICE PATTERNS,
TWO TYPES OF PATTERNS: REVERSAL AND CONTINUATION,
THE HEAD AND SHOULDERS REVERSAL PATTERN,
THE IMPORTANCE OF VOLUME,
FINDING A PRICE OBJECTIVE,
THE INVERSE HEAD AND SHOULDERS,
COMPLEX HEAD AND SHOULDERS PATTERNS,
TACTICS,
THE FAILED HEAD AND SHOULDERS PATTERN,
THE HEAD AND SHOULDERS AS A CONSOLIDATION PATTERN,
TRIPLE TOPS AND BOTTOMS,
DOUBLE TOPS AND BOTTOMS,
VARIATIONS FROM THE IDEAL PATTERN,
SAUCERS OR ROUNDING TOPS AND BOTTOMS,
V-FORMATIONS, OR SPIKES,
CONCLUSION,

6 Continuation Patterns,

INTRODUCTION,
TRIANGLES,
THE SYMMETRICAL TRIANGLE,
THE ASCENDING TRIANGLE,
THE ASCENDING TRIANGLE AS A BOTTOM,
THE DESCENDING TRIANGLE,
THE BROADENING FORMATION,
THE DIAMOND FORMATION,
CONCLUSION,
FLAGS AND PENNANTS,
THE WEDGE FORMATION,
THE RECTANGLE FORMATION,
THE MEASURED MOVE,
THE CONTINUATION HEAD AND SHOULDERS PATTERN,
THE PRINCIPLE OF CHARACTERIZATION,
CONFIRMATION AND DIVERGENCE,

7 Volume and Open Interest,

INTRODUCTION,
VOLUME AND OPEN INTEREST AS SECONDARY INDICATORS,
INTERPRETATION OF VOLUME,
INTERPRETATION OF OPEN INTEREST,
SUMMARY OF VOLUME AND OPEN INTEREST RULES,
BLOWOFFS AND SELLING CLIMAXES,
COMMITMENTS OF TRADERS REPORT,
SEASONAL CONSIDERATIONS,
CONCLUSION,

8 Long-Term Charts and Commodity Indices,

INTRODUCTION,
THE IMPORTANCE OF LONGER-RANGE PERSPECTIVE,
CONSTRUCTION OF CONTINUATION CHARTS,
THE PERPETUAL CONTRACT
THE PERPETUAL INDEX,
CHARTING TECHNIQUES CAN BE APPLIED TO LONG-TERM CHARTS,
SUMMARY OF TECHNICAL PRINCIPLES,
TERMINOLOGY OF TECHNICAL ANALYSIS,
PATTERNS ON CHARTS,
LONG-TERM TO SHORT-TERM CHARTS,
COMMODITY INDICES: A STARTING POINT,
SHOULD LONG-RANGE CHARTS BE ADJUSTED FOR INFLATION?
LONG-TERM CHARTS NOT INTENDED FOR TRADING PURPOSES,
CONCLUSION,
EXAMPLES OF WEEKLY AND MONTHLY CHARTS,
TECHNICAL INDICATORS,

9 Moving Averages,

INTRODUCTION,
THE MOVING AVERAGE: A SMOOTHING DEVICE WITH A TIME LAG,
MOVING AVERAGE COMBINATIONS THAT WORK BEST,
PLACEMENT OF THE AVERAGES,
MOVING AVERAGES TIED TO CYCLES,
FIBONACCI NUMBERS USED AS MOVING AVERAGES,
MOVING AVERAGES APPLIED TO ANY TIME DIMENSION, 262
CONCLUSION,
THE WEEKLY RULE,
ADDITIONAL REFERENCE MATERIAL,

10 Oscillators and Contrary Opinion,

INTRODUCTION,
OSCILLATOR USAGE IN CONJUNCTION WITH TREND,
MEASURING MOMENTUM,
MEASURING RATE OF CHANGE (ROC),
CONSTRUCTING AN OSCILLATOR USING TWO MOVING AVERAGES,
OSCILLATOR INTERPRETATION,
THE RELATIVE STRENGTH INDEX (RSI),
USING THE 70 AND 30 LINES TO GENERATE SIGNALS,
STOCHASTICS (K%D),
LARRY WILLIAMS %R,
THE IMPORTANCE OF TREND,
WHEN OSCILLATORS ARE MOST USEFUL,
MOVING AVERAGE CONVERGENCE/DIVERGENCE TRADING METHOD (MACDTM),
VOLUME ACCUMULATION USED AS AN OSCILLATOR,
COMPU TRAC SOFTWARE FOR OSCILLATOR ANALYSIS,
THE PRINCIPLE OF CONTRARY OPINION,

11 Intra-Day Point and Figure Charting,

INTRODUCTION,
THE POINT AND FIGURE VS. THE BAR CHART,
CONSTRUCTION OF THE INTRA-DAY POINT AND FIGURE CHART,
CONGESTION AREA ANALYSIS,
THE HORIZONTAL COUNT,
PRICE PATTERNS,
CONCLUSION,
WHERE TO OBTAIN POINT AND FIGURE CHARTS AND DATA,

12 Three-Box Reversal and Optimized Point and Figure Charting,

INTRODUCTION,
CONSTRUCTION OF THE THREE-POINT REVERSAL CHART,
THE DRAWING OF TRENDLINES,
MEASURING TECHNIQUES,
TRADING TACTICS,
ADVANTAGES OF POINT AND FIGURE CHARTING,
OPTIMIZED POINT AND FIGURE CHARTS,
SOURCES OF INFORMATION,
CONCLUSION,

13 Elliott Wave Theory,

HISTORICAL BACKGROUND,
INTRODUCTION TO THE THEORY,
BASIC TENETS OF THE ELLIOTT WAVE PRINCIPLE,
CONNECTIONS BETWEEN ELLIOTT WAVE AND DOW THEORY,
EXTENSIONS,
CORRECTIVE WAVES,
THE RULE OF ALTERNATION,
CHANNELING,
WAVE FOUR AS A SUPPORT AREA,
FIBONACCI NUMBERS AS THE BASIS OF THE WAVE PRINCIPLE,
THE LOGARITHMIC SPIRAL,
FIBONACCI RATIOS AND RETRACEMENTS,
FIBONACCI TIME TARGETS,
COMBINING ALL THREE ASPECTS OF WAVE THEORY,
FIBONACCI NUMBERS IN THE STUDY OF CYCLES,
ELLIOTT WAVE APPLIED TO STOCKS VERSUS COMMODITIES,
SUMMARY AND CONCLUSIONS,
REFERENCE MATERIAL,
EXAMPLES OF ELLIOTT WAVES IN ACTION,

14 Time Cycles,

INTRODUCTION,
CYCLES,
HOW CYCLIC CONCEPTS HELP EXPLAIN CHARTING TECHNIQUES,
DOMINANT CYCLES,
COMBINING CYCLE LENGTHS,
THE IMPORTANCE OF TREND,
LEFT AND RIGHT TRANSLATION,
HOW TO ISOLATE CYCLES - DETRENDING,
SEASONAL CYCLES,
COMBINING CYCLES WITH OTHER TECHNICAL TIMING TOOLS,
COMBINING CYCLES AND OSCILLATORS,
SUMMARY AND CONCLUSION,

15 Computers and Trading Systems,

INTRODUCTION,
SOME COMPUTER BASICS,
ANALYSIS TOOLS,
WELLES WILDER'S PARABOLIC AND DIRECTIONAL MOVEMENT SYSTEMS,
GROUPING TOOLS AND INDICATORS,
USING TOOLS AND INDICATORS,
AUTOMATION, OPTIMIZATION, AND PROFITABILITY TESTING,
PROS AND CONS OF MECHANICAL COMPUTERIZED SYSTEMS,
INCORPORATING MECHANICAL SIGNALS INTO ANALYSIS,
ARTIFICIAL INTELLIGENCE PATTERN RECOGNITION,
SUMMARY AND CONCLUSIONS,
SOURCES OF INFORMATION,

16 Money Management and Trading Tactics,

INTRODUCTION,
THE THREE ELEMENTS OF SUCCESSFUL COMMODITY FUTURES TRADING,
MONEY MANAGEMENT,
REWARD-TO-RISK RATIOS,
TRADING MULTIPLE POSITIONS: TRENDING VERSUS TRADING UNITS,
MONEY MANAGEMENT: CONSERVATIVE VS. AGGRESSIVE TRADING,
WHAT TO DO AFTER PERIODS OF SUCCESS AND ADVERSITY
MONEY MANAGEMENT IS A TRICKY BUT CRUCIAL AREA,
THE MONEY MANAGEMENT INDUSTRY,
TRADING TACTICS,
COMBINING TECHNICAL FACTORS AND MONEY MANAGEMENT,
TYPES OF TRADING ORDERS,
FROM DAILY CHARTS TO INTRA-DAY CHARTS,
DUNNIGAN'S THRUST TECHNIQUE,
THE USE OF INTRA-DAY PIVOT POINTS,
SUMMARY OF MONEY MANAGEMENT AND TRADING GUIDELINES,

Pulling It All Together-A Checklist,

TECHNICAL CHECKLIST,
HOW TO COORDINATE TECHNICAL AND FUNDAMENTAL ANALYSIS,
WHAT'S A TECHNICIAN ANYWAY?
THE GLOBAL REACH OF TECHNICAL ANALYSIS,
TECHNICAL ANALYSIS: THE LINK BETWEEN STOCKS AND FUTURES,
CONCLUSION,

Appendix 1
Spread Trading and Relative Strength,

THE APPLICATION OF TECHNICAL ANALYSIS TO SPREAD CHARTS,
RELATIVE STRENGTH BETWEEN NEARBY AND DISTANT CONTRACTS,
RELATIVE STRENGTH BETWEEN DIFFERENT MARKETS,
RATIO ANALYSIS,
RELATIVE STRENGTH BETWEEN COMMODITY INDICES,
STOCK INDEX FUTURES VERSUS THE CASH INDEX: A MEASURE OF SHORT-TERM MARKET SENTIMENT,

REFERENCE SOURCES,

Appendix 2
The Trading of Options,

WHAT IS AN OPTION?
WHY PURCHASE AN OPTION INSTEAD OF A FUTURES CONTRACT?
HOW OPTIONS AND FUTURES CAN BE USED TOGETHER,
"AT DETERMINES PREMIUM VALUE?
TECHNICAL ANALYSIS AND OPTION TRADING,
TECHNICAL ANALYSIS APPLIED TO THE UNDERLYING FUTURES MARKET,
RECOMMENDED READING,
PUT/CALL RATIOS AS A MEASURE OF MARKET SENTIMENT,

Appendix 3
W. D. Gann: Geometric Angles and Percentages,

INTRODUCTION,
GEOMETRIC ANGLES AND PERCENTAGES,
THE IMPORTANCE OF THE 45-DEGREE LINE,
COMBINING GEOMETRIC ANGLE LINES AND PERCENTAGE RETRACEMENTS,
REFERENCE SOURCES,

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