Recommended Reading 05-29-2014

Readers repeatedly ask me for book and article recommendations, especially new traders who are interested in learning more about trading and investing.  Here is another book recommendation from my personal finance library. A complete list of all past recommendations is available on the Recommended Reading page.

Brian Johnson's Recommendation

Point & Figure Charting: The Essential Application for Forecasting and Tracking Market Prices, Fourth Edition

by Thomas J. Dorsey

Point & Figure Charting is a practical guide to understanding and applying Point & Figure charting to all aspects of trading across a wide range of instruments.  It begins with a detailed introduction to point and figure charting that assumes no prior knowledge of the subject. Dorsey then delves deeper into the fundamentals and objective chart patterns that can be used to manage both short-term and long-term trades.  The point and figure tools are then applied to an analysis of relative strength and general market direction.  Finally, Dorsey explores sector rotation, fixed income, ETFs, and even commodity trading.  Dorsey is one of the leading experts on point and figure charting and the book and accompanying CD provide a educational and practical guide to using these fascinating tools.

To learn more about point and figure charting, please revisit my article on this subject titled "The Easiest Way to Identify Trends."

Point & Figure Charting: Editorial Reviews

From the Inside Flap

The Point and Figure method of investment analysis is not new by any stretch of the imagination. While little has changed in terms of its basic principles over the years, there are new and interesting ways of implementing this proven method—especially with the help of today's rapidly evolving computing technology.

Nobody understands this better than top Point and Figure Charting expert Tom Dorsey. Now, in the fourth edition of Point and Figure Charting, he returns to explain how traders and investors alike can use this classic technique—borne out of the irrefutable law of supply and demand—to identify and capitalize on market trends.

Within these pages, Dorsey offers valuable insights on establishing an "operating system" mindset—a belief in your method of analysis that you understand and embrace wholeheartedly—using the Point and Figure method. This will help carry you through your investment endeavors. Along the way, he provides step-by-step guidance on how to create, maintain, and interpret your own Point and Figure charts with regard to markets, sectors, and individual securities. He also explains how to use these findings to effectively track and forecast market prices and develop an overall investment strategy.

Divided into three comprehensive parts, Point and Figure Charting, Fourth Edition provides you with the insights to excel in many different markets, and under various conditions. Through a thorough discussion of everything from recognizing reliable chart patterns and the adaptability of Relative Strength (RS) to primary/secondary market indicators and using options as a risk management tool, this practical guide will allow you to make more of your time in today's markets by answering such important questions as: Is the market in a mode to support higher prices? Did you search the right sector? Which asset classes are in favor? And what countries are the best places to invest?

This book also comes with a companion website. It brings the concepts covered to life with additional examples and discussions, as well as exercises and tests to refine your skills. In using this interactive resource, you will have an important technical analysis tool to enhance your investments and portfolio performance.

Many people have forgotten or ignored the fact that having a logical, organized, well-founded method of investing in the markets is the only way to achieve success. So if you're looking for an investment approach that has stood the test of time—during both bull and bear markets—and is easy enough to learn, whether you're eighteen or eighty, then Point and Figure Charting, Fourth Edition is the book for you.

From the Back Cover

Praise for Point and Figure Charting

"I have spent five decades in the financial services industry, and it is a hard thing to navigate the markets; but Tom's Point and Figure method is the most straightforward, logical way that I've seen of analyzing the markets. He has expanded my understanding of the stock market and the way I look at my investments."
—Hugh L. McColl Jr., retired CEO, Bank of America

"Everyone who's involved in financial markets must understand Point and Figure charting in order to get the full picture, whatever your view of technical analysis."
—Jim Rogers, author of Hot Commodities and Investment Biker

"Tom Dorsey's industry-leading technical research has survived the test of time and continues to adapt to the new and ever-changing world of the investment advisor. I have counted Tom as a friend and business partner for the last two decades, and continue to learn at the feet of the master. Once again, Tom is equipping the advisor, through this book, with the armor needed to both defend a client's assets and outperform when the markets look impossible."
—Ben Fulton, President and CEO, Elkhorn Investments

"The key to successful investing is to adhere to a disciplined, time-proven method for entering and exiting a stock, a sector, or the market as a whole. Point and Figure Charting provides that discipline and there is no better champion than Tom Dorsey. In clear concise language, Tom has, once again, explained the dispassionate barometer that can give every investor the confidence to know when to buy and when to sell."
—Joshua B. Parker, President, Gargoyle Investment Advisor LLC

"The three cornerstones of our high-net-worth/ultra-high-net-worth financial advisory practice are macro, fundamental, and technical analyses. When it comes to technical analysis, we use Dorsey, Wright & Associates daily to monitor both portfolios and dynamic changes in asset classes and make decisions based on the data and trends we see. We think in this post—global financial crisis world that the Point and Figure methodology is extremely important in navigating markets."
—Stephanie Twomey, Director, Twomey, Zell & Gibbons Group, Morgan Stanley Private Wealth Management; Barron's Top 100 Women Financial Advisors

Conclusion

The point and figure method provides a completely objective framework that integrates price and time using a unique process that is very easy to understand.  This approach can be used to trade individual securities, market sectors, and even the overall market.  Point & Figure Charting: The Essential Application for Forecasting and Tracking Market Prices, Fourth Edition was written by one of the leading practitioners in the field. I highly recommend this book for all traders and investors.

Disclosure: Trading Insights, LLC has an affiliate referral relationship with Amazon.

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About Brian Johnson

I have been an investment professional for over 30 years. I worked as a fixed income portfolio manager, personally managing over $13 billion in assets for institutional clients. I was also the President of a financial consulting and software development firm, developing artificial intelligence based forecasting and risk management systems for institutional investment managers. I am now a full-time proprietary trader in options, futures, stocks, and ETFs using both algorithmic and discretionary trading strategies. In addition to my professional investment experience, I designed and taught courses in financial derivatives for both MBA and undergraduate business programs on a part-time basis for a number of years.
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