A chartist is a trader who relies predominantly on charts to help them understand a financial instrument’s historical price movements, to better predict and speculate on its future direction.
Understanding Chartists
A chartist is someone who studies charts to make smart decisions about buying and selling things like stocks, currencies, and bonds. They don’t usually focus on the basics of a company or investment when they decide what to do. Instead, they look for patterns in the charts, like head-and-shoulders shapes or levels where prices tend to stop going up or down.
Chartists believe that the way prices move isn’t random and can be figured out by looking at past patterns and using technical analysis. Some chartists might mix in basic analysis too, but they mainly use technical analysis to decide when to buy or sell.
Chartists have lots of tools and methods they use to study charts. They don’t rely on just one thing to make decisions. Instead, they use a bunch of different tools and patterns to help them figure out what to do. There isn’t one “right” way to do it, so chartists usually create their own rules based on what they’ve learned and what’s worked for them in the past.
They use things like indicators, personal feelings, and the psychology of trading to make choices about investing. They pay attention to patterns and trends that have shown up before to decide when to buy or sell. Some patterns, like envelope channels and Bollinger Bands, are especially important for chartists to watch for signals about when to invest.
Some serious chartists might try to become a Chartered Market Technician (CMT). It’s a special certification that shows they know a lot about reading charts and making investment decisions.
Technical Systems
Chartists use technical analysis trading systems to guide their investment decisions. These systems are mainly designed for individual traders, especially those who trade frequently throughout the day. Chartists have different options for these systems, and many brokerages offer them as part of their services.
Brokerages often provide their charting software, which includes various charting patterns. However, experienced chartists may prefer to get their charting software from independent vendors. This gives them access to a wider range of charting patterns and features.
Some of the most popular independent vendor charting platforms include MetaStock, TC2000, eSignal, NinjaTrader, Wave59 PRO2, EquityFeed, ProfitSource, VectorVest, and INO MarketClub.
These platforms offer a variety of customizable charting patterns. They also differ in the markets they cater to and the additional information they provide, such as news feeds and fundamental data.