Before I commence with this review I must reveal that I am staunch fundamental analyst. Ever since I first came across technical analysis at university I thought that the concept seemed like utter balderdash. Being able to predict how shares will perform in the future by examining historical price information sounded to me about as credible as being able to predict next week's lottery numbers by looking at which numbers came up in the previous week. In particular I could never get my head around the theory that, "the trend is your friend", or in other words, that you should buy shares when they are going up (or vice versa) under the impression that they will continue to do so because they had done in the past. Just because Arsenal win three games in a row doesn't mean that they will beat Manchester United next week.

Despite my doubts I decided to expand my knowledge of the subject, if not to change my views then to help know the enemy better. The author of the book, Brian Marber, must have looked at millions of charts over his career. He has been a technical analyst since 1963 and during the 1970s and 80s was voted by institutional investors as the Number 1 technical analyst in the City for six years in a row. So if anyone would be able to persuade me over to the dark side it would be this seasoned veteran.

The first main chapter of the book, funnily enough the Glossary, is perhaps the most useful. Marber explains the main terms used in technical analysis, in an informative, if rather off-beat manner. The simpler terms, such as dealer, brokers and bottoms, are given the opinionated Marber treatment, while the more complex vocabulary, which would be less well known to the fundamental analyst, is explained in more detail. I now know that Fibonacci was a thirteen century mathematician, as opposed to a type of pasta. I also know why he is meant to be relevant to the stockmarket.

Marber then goes into the theory behind technical analysis and in less than a hundred words tries to completely discredit fundamental analysis as a method of research. He argues that since the first and last thing that people look at when making an investment decision is price, as such, the price already contains the sum of all the fundamentals and consensus of the market. Therefore, he argues, it is a waste of time to look at the fundamentals when the price sums it all up in one easy piece of quantifiable data.

However this central tent of charting is of course flawed - it would only work if every market participant had equal selling/buying power and equal knowledge. This central tenet of charting is like saying that we will decide the maths behind the theory of relativity via an opinion poll where Einstein could get the same vote as Tom Winnifrith's cat. In fact (to make it really like the City) the cat could run a huge investment fund and Einstein be a small punter so the cat's opinion counts for far more than that of Einstein. That is why charting is theoretically flawed. The proof that markets are not perfect is that Warren Buffett consistently outperforms and some punters consistently underperform. In a perfect market that could not happen since all information should already be priced in.

Okay, so I think charting is cobblers. I still read the book and after chapter 1 the rest of the book then follows on from on what price leads to and how this is depicted in charts. Marber explains how trends, support, resistance, patterns, indicators, candlesticks, and the like, can be used to predict where the price will be in the future. The finer details of each individual technical theory and technique are beyond the scope of this review, but after a thorough read of 11 chapters of Marber's work I can only come to one conclusion. Sometimes technical analysis works and sometimes it doesn't. As Marber himself says when describing one specific technique, "flags don't always work; nor does any other pattern". So in other words that means technical analysis could make you money, but it also might not. Despite Marber's best efforts he has not convinced me that technical analysis is better than or even equal to fundamental methods of investment research.

Whether you do or do not support Marber's arguments you have to admire the author's informative and irreverent style which makes this book stand out from other, dry, text book style volumes on the subject. The book is also very well laid out, with short snappy paragraphs complimented by clear and colourful graphs. Marber's decades of experience in the field will provide a useful reference for the chartists among you, with the amusing anecdotes and stories of his career in finance well worth the price of the book alone. If you want to learn more about charting, my view is that it will not make you a better investor, but if that is not a deterrent, this is a good book on the voodoo science and my fundamental analysis is that this is a SPECULATIVE BUY.

Taken from the UK-Analyst.com Weekend Book Review, 19th April 2008, by Richard Gill of the Aim & Plus Newsletter.