The Visual Investor: How to Spot Market Trends, Second Edition

CHAPTER 1

What Is Visual Investing?

They say a picture is worth a thousand words. Maybe they should have said a thousand dollars. After all, we’re talking here about using pictures to make money. And that’s really what this book is about. It’s that simple. A stock either goes up or down. If it goes up, and you own it, that’s good. If it goes down, and you own it, that’s bad. You can talk all you want about what a stock should be doing or why it isn’t doing what it should be doing. You can talk about inflation, interest rates, earnings, and investor expectations. Ultimately, however, it comes down to the picture. Is the stock going up or down? Knowing the reasons behind a stock’s movement is interesting, but not critical. If your stock goes up on a given day, they won’t take the money away from you if you don’t know why it went up. And if you can explain why it went down, they won’t give you back your lost money. All that really matters is a picture, a simple line on a chart. The trick to visual investing is learning to tell the difference between what is going up and what is going down. The goal of this book is to help you tell that difference.

WHY MARKET ANALYSIS?

As the various chapters unfold, you will be provided with some relatively simple visual tools to aid you in market analysis and timing. Notice our use of the term market analysis. Whatever you choose to call it, the bulk of this book deals with visual analysis of the financial markets by utilizing price and volume ...