Charts... (could be a bit dry....)16 Jun 2026 13:21
Its simple in as much it relies for its accuracy on the belief in human psychology. If you "believe" in that, ie groups of peoples actions are predictable , then all a chart is, is the graphical representation of that group of people buys and sells which in turn suggest as what the majority think will happen in the near future. Under certain conditions (many psychological experiments have proven, peoples reactions are predictable.
The alternative is looking at the company itself and its fundamentals, what it does, what its finances are and competition, earnings/ profits, supply and demand and all the rest of it to define "value" and if the company looks undervalued you buy the stock. The argument against this is twofold I think.
One, its comparative against other like, but not the same, companies and it is a completely arbitrary ratio, and the second is the PI simply has not got enough data or even up-to-date info to make an accurate assessment. And the final drag on "value" systems is that the market already is looking 3-6-12 months ahead and has factored that into the SP
So on a chart, the conditions that are play to suggest it is predictable ie what happened before, will happen again, are the emotional drivers of fear and greed.
Charting (or TA) is often characterised as only good for gamblers but paradoxically it is better practised by a non-gambling character, as it is very mechanical and the trick is to remove the individuals emotions from the decision to buy or sell.
The other "advantage" of TA is that the practitioner does not know or care about the company itself, believing all the information necessary to make a decision is already in the SP. Personally I think when (and CPX is a good example), so much is unknown behind the scenes, so much is "old" data, what is the PI to believe and what to dismiss?
But the one indisputable fact is, what the SP is at any given time and as it is the only indicator that we all care about in the sense that is what we calculate our risk and reward (the cost of buying and selling) on, that everything else ultimately does not matter.
We can howl at the moon when we sell that the company is undervalued and the SP should be double what it is etc etc but it is irrelevant. It is what it is.
Therefore as it is the single indicator we can neither influence but rely on totally, it made sense to me to see if there was anyway of getting an edge by putting the SP front and centre of any system to improve the odd's of success, (given that NO system is fool-proof)
(Well done if you hung in there to the end.....)