The Introduction to the Magee System of Technical Analysis

By Masonson, Leslie N. | Modern Trader, November 2002 | Go to article overview

The Introduction to the Magee System of Technical Analysis


Masonson, Leslie N., Modern Trader


The Introduction to the Magee System of Technical Analysis

By John Magee and W.H.C. Bassetti

St. Lucie Press

New York (2002)

268 pages and a CD-ROM, $55

REVIEWED BY LESLIE N. MASONSON

There are well over 200 books on technical analysis. However, only about five books have been written by John Magee, the "father of technical analysis." The seminal work, Technical Analysis of Stock Trends, was co-authored by Magee and Robert D. Edwards and first published in 1948 (now in its 8th edition). This textbook is considered the bible of technical analysis.

Although Magee died on June 17, 1987, Bassetti, a student and client of Magee, has expanded upon Magee's work by recently publishing The Introduction to the Magee System of Technical Analysis. This book is a primer rather than an indepth look at the subject, focusing on technical analysis for the beginner. Its overall goal is to provide a solid grasp of the subject matter so that the investor can effectively manage a mid- to long-term portfolio.

The book starts out with a statement of the critical principles and basics of technical analysis crafted by Magee. Then Bassetti summarizes and extracts Magee's interpretation for the reader, using current examples. Topics include support and resistance, trends and channels, flags and pennants, head and shoulders, gaps, spikes and reversals. Afterward, the book looks at when to buy and sell and how to use buy and sell stops effectively.

Other topics briefly mentioned include the relative strength index, Bollinger bands, rate of change, moving average convergence-divergence, moving averages, equivolume and candlestick and point-and-figure charts. Readers looking for a detailed discussion and examples of these studies will be disappointed.

Magee developed a specific methodology for investing, using technical analysis that includes risk (diversification by industry, geography and investment type), portfolio management and control, rhythmic trading (position liquidation as the market matures and changes direction) and personal psychological management. …

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