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“Technical Analysis of Stock Trends” – (Robert Edwards, John Magee) Book Review

The classic technical analysis text is now up to the 9th edition!  Whether or not the 8th edition was in need of updating is questionable. Nevertheless, this review will address this latest edition as a stand-alone offering, and will assume readers have not yet discovered the previous versions of this classic. It must be noted, however, that the 9th edition of “Technical Analysis of Stock Trends” (pub. Amacon, 2010) by Robert Edwards and John Magee is also “co-written” by W.H.C. Basseti. Mr. Basseti is a professor of finance at Golden Gate University. I say co-written, since Mr. Basseti, in most part, leaves the original text as it was, but provides a running commentary throughout to elucidate and modernize the text when necessary.  Honestly, I feel that his commentary is largely unnecessary, and at times even borders on the obvious. Of course there are some dated elements in a book originally published in the 1950’s, but that is part of the allure to reading a classic text on any given subject.        

Regardless of the newest author’s asides, “Technical Analysis of Stock Trends” is certainly required reading for anyone who wants to learn both the art and science of technical analysis.  Every aspect of the discipline is covered from the earliest works of Charles Dow, to every conceivable chart pattern. Again, some may feel the material is dated since the charts often reflect data from nearly 50 years ago.  I do not feel this is a detriment, since chart patterns are largely time-independent.  If anything, I believe the older charts help bolster the validity of many of the concepts, due to their time-tested nature.

The second half of the book puts many of the previous concepts to use in actual “trading tactics”.  Edwards and Magee touch on the use of stop-losses, risk management and security selection.  There are some passages in this part of the book that have been rightfully updated, such as the use of VAR (value-at-risk), drawdowns, and other newer risk metrics. The text benefits from these additions, as it presents a more full range of risk management techniques that are actually used in today’s markets.  Regardless of the edition, this book should be considered required reading for both fledgling technical analysts, and a refresher for more seasoned veterans of the craft.

P.S.     For those readers looking to access a “classic” version of this text, I would recommend you seek out a used copy of the last edition written by Edwards & Magee alone. This would be the 5th edition. It is very attractively bound, and can usually be found for less than $10 for a copy in decent condition.

Disclosure: None