“Charting” Confusion
This post from yesterday brought this feedback:
“The problem with [these] statements [is] that [they] totally downplay the use of ‘technical charting’ as a means of trading. My question…would be, if you believe in [a] Trend Following methodology, how do you answer the five questions in Chapter 10 [of Covel's book] without looking at a chart or at least at a table of numbers? Do you peruse astrology tables or consult a Ouija board? No, of course not. You look at a chart just the same as does someone who does ‘technical analysis.’ What if a true novice who is trying to learn about [trend following] were to read [these] statements as his or her first exposure to the concept? They might easily deduce that they should never consult a chart. Charting is not the enemy. Stochastics, RSI’s, moving averages, et al are the components of ‘technical analysis’ that are the culprits. But, let us not confuse charting with technical analysis.”
I don’t know what a true novice or anyone for that matter would do with a “chart” exactly. Trend followers use price data to make decisions. They look at the raw numbers for their signals and bet sizing. They don’t “read charts”, whatever that means exactly.
In terms of “technical analysis”, I have tried to make clear the case in my book that there are two popular ways to view the subject. One involves prediction (useless) and one involves reaction (employed by the great traders). I cringe when I hear the term “technical analysis” as the term has no universal defintion and means so many things to so many different people.
Perhaps the feedback above about yesterday’s post and my comments in retort will provide clarification to a subject area riddled with never-ending jargon.
