How do you know how to analyze and pick the best stocks or ETFs or Mutual funds? One answer is to use technical analysis and this sounds scary because almost none of us know how to do this. But we don’t need to.

Using technical analysis is a surefire way to make the best choices and all you need is a software program that will do the job for you. Obviously you want a program that has a proven, reliable track record. Such technical analysis software will easily give you double digit gains and out-perform the S&P 500 or the Dow Jones.

Michael J. Carr wrote a book in 2008 and the second edition has just been released, April, 2011, titled “Smarter Investing in Any Economy.” The sub-title is “The definitive Guide to Relative Strength Investing”. In other words, Carr, a chartered market technician, CMT, has thoroughly examined technical analysis.

Carr’s analysis delves into the nitty-gritty. The first part of his book is a bit dry and sometimes over my head until I read it a second time, but he explains and tests formulas based on different theories and concepts over different time frames. He also talks about investing in ETFs, mutual funds and stocks, so the book fits with whatever investment or diversification desires you may have.

Technical analysis can involve studying data in a spreadsheet format and/or reviewing charts.

There are numerous formulas for analyzing the data, for example: 
• Alpha 
• Relative strength momentum 
• Return 
• Price oscillation 
• Relative strength index 
And you can add standard deviation to any of these.

Charting price movement or analyzing with charts is very popular and there are dozens upon dozens of chart types. Some of the most popular charts are: 
• Return 
• Moving average 
• Stochastic 
• Relative strength 
• Moving average crossover 
• Bollinger bands 
• Rate of change 
• Exponential moving average

One chart that Carr highly recommends is the Equity Curve. This is a moving average chart with both the fast and slow settings being identical. When the price line of the ticker symbol or the group being charted drops below the equity curve it is considered a signal to exit the strategy or the markets.

While Carr provides his readers with different formulas he shows how investing based on relative strength will provide returns equal to your objectives. Using an Alpha formula with a standard deviation component helps to reduce risk and provides an excellent means of analysis for a more conservative investment approach. Using just an alpha formula or relative strength formula can be a more aggressive investment approach.

The key to technical analysis lies not in being a mathematician, leave that to Carr, or even being a expert with Excel, but in finding user-friendly software that implements technical analysis; preferably software that doesn’t require months to learn.