StockCharts free for the Technician
Written: Jan 10 '00 (Updated Jan 11 '00)
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Pros: Free, no reg required, nice Java applets
Cons: Stock charting won't make you money
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| rag47's Full Review: StockCharts.com |
Stock market technicians will have a ball with StockCharts.com. It's totally free and they don't even make you register, so you don't wind up on yet another spam list.
The site lets you enter a ticker symbol and uses Java to generate an interactive stock chart. You can then add your own trendlines, or plot moving averages, exponential averages, etc. There are quite a few tools available such as Relative Strength and Advance-Decline, along with marker bars to help line them up with the stock price chart. I liked the regression channel tool very much. Coverage is quite complete - even obscure tickers like NCD are covered.
It's all nicely done. As a software developer myself, I applaud their intelligent use of the much oversold Java - this is a good application for it. On the downside, Internet Explorer has crashed twice on me while using this site and that's a drag.
Stockcharts.com also will draw for you point-and-figure charts. If you don't know what these are, I won't try to explain it in an epinion, but they are a lot of fun to fool with. I remember going around clutching my dog-eared copy of A.W. Cohen's "The Chartcraft Method of Point and Figure Trading" thirty years ago. I was a runner at the Chicago Board of Trade and saw some of the floor traders using P&F charts. However, I found out that they didn't do them like Cohen said. They entered every change (to the smallest increment) without any "reversal" limit. I think the floor traders mostly used these as a memory aid to recall the day's trading. There are a few features I'd like to see added to the StockChart.com P+F charts, namely showing the target price after a formation breakout, and the ability to draw trendlines (both the 45 degree kind and the those drawn from bottom to bottom, or top to top). There's also a problem with generating P&F charts from daily stock data - if the stock swings over a wide range during the day, you have to guess whether it went up first or down first. This isn't a problem if you chart every tick. P+F charts originated as a tape watcher's tool.
If you're not the do-it-yourself type, StockCharts.com has reports from technical analysts and these are free, too. It would be fun to see some Elliot Wave Theory analysis. The site can also do stock scans, looking for stocks that had moving average breakouts, for instance.
Now for the bad news: there's one great big problem with all this - namely, that technical analysis of stocks just doesn't work. It's like astrology or numerology. There's a great book on Wall Street written in 1940 by Fred Schwed entitled "Where Are the Customer's Yachts?". Get yourself a copy - it's still in print after all these years. His thesis is that most stock market analysis is published for the benefit of the analyst or advisor, not you the customer. So, like Fred, I ask where are the technician's yachts? The richest and most famous stock traders, like Warren Buffet and Peter Lynch, trade on the fundamentals. The largest and most successful mutual funds, apart from the index funds, are based on fundamental analysis, either value or growth. Sure, there are some mutual funds that trade on technical analysis, but they are not the big winners. Technical analysis also tends towards short-term trading, which fails because of transaction costs (not just commissions, but also the bid-ask spread, and taxes). Do you think Bill Gates bought $100 million of Apple at $13/share after poring over his stock charts? Ha! Do yourself a favor and turn to long term investment based on fundamentals and make yourself some real money.
Recommended:
No
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Epinions.com ID:
rag47
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Location: Issaquah, WA
Reviews written: 21
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