1. Map the Trends

   Always start by looking at the bigger picture – even if you like to trade short term study the market over the longer term and start off with monthly and weekly charts and then go to daily and intra- day charts.

2. Spot the Trend and Go With It

   always determine the prevailing trend and follow it. Market trends can be long-term, intermediate-term and short-term. Decide which one you're going to trade and use the appropriate chart. Always trade the trend! This means you buy dips if the trend is up and conversely, Sell rallies if the trend is down.

3. Find the Low and High of It

   Find support and resistance levels and use them to enter trading signals The best place to buy a market is near support levels which is usually a previous reaction low. The best place to sell a market is near resistance levels and this is usually a previous peak. After a resistance peak has been broken, it will normally provide support so the old "high" becomes the new low. Conversely, when a support level has been broken, it will usually produce selling on subsequent rallies – the old "low" can become the new "high."

4. Know How Far to Backtrack

   Market corrections up or down usually retrace a significant portion of the previous trend. You can measure the corrections in an existing trend in percentages. A fifty 50% retracement of a prior trend is very common and a minimum retracement is usually around 33% of the prior trend. The maximum retracement is usually 75%. By knowing how far the market retraces you can decide on entry and exit points.

5. Draw the Line

   Draw trend lines and trade in the direction of the trend - Trend lines are one of the simplest but most effective of all charting tools and you should always draw them. Up trend lines are drawn along two successive lows. Down trend lines are drawn along two successive peaks. Breaking of trend lines of course signals a possible change in trend. A valid trend line should be touched at least three times and the longer a trend line is in terms of duration of time and the more times it has been tested, the more important a break becomes.

6. Follow That Average

   Follow moving averages which can if used correctly provide objective buy and sell signals and tell you if existing trend is still in motion and can help confirm a trend change. Popular combinations are 4- and 9-day moving averages, 9- and 18-day, 5- and 20-day. Signals are generated when the shorter average line crosses the longer one. Another average which is popular is the 40 day MA and crosses above or below can signal the end of an existing trend or the start of a new one. 

7. Learn the Turns

   Track oscillators. Oscillators help identify overbought and oversold conditions in the market, while moving averages offer confirmation of a market trend change, oscillators often can help warn in advance that a market has become overbought or oversold an is due a turn. Popular oscillators are the RSI (By Welles Wilder) and the stochastic indicator ( by George Lane) 

8. Know the Warning Signs

   Trade MACD. The Moving Average Convergence Divergence (MACD) indicator ( by Gerald Appel) combines a moving average crossover system with the overbought/oversold elements of an oscillator. A buy signal occurs when the faster line crosses above the slower and both lines are below zero. A sell signal takes place when the faster line crosses below the slower from above the zero line.

9. Trend or Not a Trend?

   Use ADX. The Average Directional Movement Index (ADX) line is yet another indicator from Wells Wilder and is used to determine whether a market is trending or is in a period of consolidation.
   

10. Know the Confirming Signs

    Volume and open interest are important confirming indicators in markets as volume precedes price. It's important to ensure that heavier volume is taking place in the direction of the prevailing trend. In an up trend, heavier volume should be seen on up days. Rising open interest confirms that new money is supporting the existing trend.

Summary

"My work has gotten better due to simplifying my approach," John J. Murphy

John Murphy was the technical analyst for CNBC-TV for seven years on the popular show "Tech Talk" and has written three best-selling books and all are considered classics by traders worldwide.

1. Technical Analysis of the Futures Markets

2. Intermarket Technical Analysis

3. The Visual Investor.

Many traders consider Murphy's book, "Technical Analysis of the Futures Markets" to be the bible of technical analysis and this book is essential reading for any trader novice or pro.