Recently, I received a question about the “art” of chart reading, and this stirred some movement in this muddled brain of mine …
My thinking is that most people when they hear the word “art” think immediately of paintings, sculptures, and other such creative endeavors. True, patterns on charts can be somewhat artful, as seen in the chart below, but is it an art to read identifiable patterns in charts? This question is the spoon that stirred movement in my muddled brain.
The simple answer to the question is “yes.” As it is in life, though, simple answers often don’t satisfy the need to understand.
Reading charts is a technical exercise, true, but to get it “right” one has to “interpret” the trade possibility from a series of lines and squiggles. Interpreting charts is more than just guessing whether the pattern suggests movement up or down. Interpreting charts includes defining support and resistance levels, finding entry/exit points, and determining strength or weakness in a trend, for example. One has to do this without explicit information, without facts. Unto itself this is artful, but consider that to gain an edge from reading charts, one has to be able to discern patterns as they are forming, and one then has to confirm the identifiable pattern has formed.
More than a few fundamental traders argue that chart reading is akin to reading tea leaves, but the fact is that market patterns repeat. Although tea leave patterns repeat as well, the one big difference is that market patterns derive from human behavior, and human behavior in the general is predictable. Patterns formed from tea leaves are random and not predictable. Yes, I understand that when the discussion moves to human behavior, the topic moves from art to science. This, then, is the line between the two, but at this point, the line is blurry. In fact, some might plausibly argue that the “science” of human behavior is not a science at all; rather it too is an art. In the end, though, if one is making money reading charts, he or she is either going about this scientifically or artfully. Art or science? Does it matter as long as it works?
Trade in the day; invest in your life …
