Too many people seem to have a blind faith approach when investing, and if a share continues to slide they hang on in the hope that one day it will rise. This can tie up money that could be better used for other opportunities and, for me, a major benefit of a trend/charting approach is that it is very clear when my view is wrong. Take the small, manageable loss and move on to pastures new. Whether you are a trader or an investor, the trend really can be your friend – which is why I would argue we should all be paying attention to this most basic part of the chart first of all.
It’s more than 20 years since I qualified as a technical analyst. Yes, there is actually a formal examination process that can be taken for squinting at squiggly price lines. In the UK the qualification is run by the Society of Technical Analysts and it is a rigorous test of your knowledge of the many aspects of technical analysis and charting.
When I first started out, charting was still a relative backwater of financial research for many people. Nowadays, with the proliferation of high speed internet connections, sophisticated trading platforms and social media, it can sometimes feel that every man and his dog has an opinion on the trend of the FTSE, gold and the Bolivian Boliviano against the pound.
But let’s not be too negative about the proliferation of charting opinions – I think this increased awareness is a good thing. Let’s also not forget that charts don’t move markets – that’s the job of buyers and sellers. But knowing just where you are in a trend can be useful for all sorts of investment decisions – not least when actually doing nothing at all is the right move….