The Book Corner - Review

Technical Analysis for the Trading Professional, Second Edition, by Constance M. Brown

Technical Analysis for the Trading Professional, Second Edition, by Constance M. Brown

Technical Analysis for the Trading Professional, Second Edition: Strategies and Techniques for Today’s Turbulent Global Financial Markets

by Constance M. Brown, CMT
McGraw-Hill, 2011
464 pages

4 stars: Thought-provoking and intellectually stimulating materialTechnical Analysis for the Trading Professional: Second Edition is an excellent-read both for academics seeking a practice-oriented perspective to technical analysis and for active investors seeking analytical tools to help achieve more positive short- and medium-term returns particularly in volatile markets. The book is also required reading for certification in the Chartered Market Technician (CMT) program. Author Constance M. Brown, founder of Aerodynamic Investments Inc. and an institutional trader and fund manager for over eighteen years, has written eight other finance books capitalizing on her successful career.

In this updated second edition, Brown disagrees with the arguable tenet that technical indicators fail, and she provides key strategies and techniques that improve upon conventional technical analysis. Brown maintains that technical indicators are not failing, but that many trading professionals are not adjusting these indicators properly. All quote vendors now use the same default variables within their analysis software, and less experienced traders rarely change these default settings. Brown urges traders not to use the exact same setup periods and formulas.  Rather, she provides suggestions and strategies that help improve conventional technical analysis.

Brown extensively updates her analysis and applications of oscillators, Composite Index formulas, Gann analysis, Fibonacci retracements & swing projections, and cycle analyses. For example, Brown argues that oscillators do not necessarily fluctuate between 0 and 100 and that all signals do not necessarily fall within the traditional default overbought and oversold bands. Brown further argues that dominant trading cycles are not time symmetrical and provides a more accurate approach for determining the time period for an oscillator. In addition, she argues that dominant trend lines are not always from extreme price highs or lows and that signals from moving averages are frequently absent in real-time charts. In addition to the key points above, Brown provides other strategies that improve conventional technical analysis. She concludes that adapting these strategies may help professional traders improve their market timing and succeed in today’s volatile global markets.

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