Are the chartists astrologer of the stock market?
Charts are extremely popular and you must have seen them in the newspaper, on the television and on computer. Chartists believe that they can see pattern in the charts which can predict future price movements. Chartists like to make lines over the charts, usually connecting the series of high or low points.
The chartists have their own systems that they follow, normally based on the thoughts of a guru from long time ago or perhaps some pattern that exist in nature. The way chartists appear themselves sounds very scientific, but they are no more than astrologers of the stock markets.
The beauty for chartist is that they don’t have to know anything about the market they are trading. They have no need to look at the fundamentals. Chartist predictions are mostly connected with “if”, If the market is above the so and so price, then it can hit new high. Chart seems perfectly, once they are made. While predicting it has every time danger of hitting STOPs.
Three trends market can have Up, Down or Steady. Steady markets are hard to predict and it has neither profit nor loss. 50% of probability with up market or down market. Now, chances of being right or wrong for the chartist is 50%. Moreover, a smart chartist will suggest you stops, to cut off losses if the price move in wrong direction than your transaction. And hold the position in case of profit to take the maximum profit possible. But in actual market, I have seen lots of people holding their position in loss instead of profit. If you willingly take loss and can wait to take maximum profit possible, the probability for winning can changed to 70% by taking small losses and big profit. And the stop-loss can be determined on percentage base instead of previous top and bottom of the charts. There is nothing to do with chartist.
Let me be clear on this, I don’t mind having a look at the chart every now and then. But it’s the crazy theories that chartists use, especially on television. Charts suggestion are not based on true mathematical basis, nor the chartist have a mathematical background of any kind. Charts may have accidentally formed some pattern in the past, but there is no reason it should continue. Charts themselves are useful for the feeling of how far markets can move and they react on news.
What is a good part of the chart? Trend of the market can be decided with the help of the chart. Change in trend in the market is a most important thing that fundamental analyst fails to know. And the second thing is history of the stock, you can check the long movement of the stock by chart, that is almost impossible to view the prices and decide the movement in the price?
Let’s have an another idea for chartist vs. astrologer. What if someone discover a method of astrology that predicts market turns with high accuracy? What does make it difference as far as money is coming out of it. chartists are astrologer and their prediction fails. We have to think , worry about them. But if you have developed particular method with technical analysis that makes you money, that would be welcomed. Two winning transaction out of three is a good winning game, in that you lose one trade and win two, so overall you make good money. I haven’t seen any astrologer or chartist predicting markets with 100% accuracy. Only they can predict is a long term trend.
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