Technical Analysis: Power Tools for Active Investors

Part I: Picking the Right Investment Vehicles

Successful investing involves two basic areas of decision: what do you buy and sell, and when do you buy and sell. We’ll be moving along into the “whens” in chapters to come, as we develop a broad array of market timing techniques. Before we move into timing, however, we will consider some principles and procedures that should prove helpful in selecting vehicles in which to invest.

It’s not how much you make that counts; it’s how much you manage not to lose.

Let’s start by considering just a few numbers. The Nasdaq Composite Index reached an all-time high on March 6, 2000, closing that day at 5048.60. The ensuing bear market took the index down to a low of 1,114.40 on October 9, 2002—a loss of 77.9%. ...