Charting, an overview

Celticheart Investor

A beginner's guide to trading and investing

I think it is worth clarifying at this point that it was not my intention to focus so heavily on technical analysis but as with all things once you follow a path it sometimes leads you in an unexpected direction.

So, before I continue on that journey which is as much a learning curve for me as my readers I would like to take this opportunity to look at things from a much wider perspective. There is nothing more damaging in my opinion than to become so blinkered by charts and graphs that you lose sight of the basic reasons that made you buy into the company in the first place.

What people often fail to see with charts is they are not some kind of oracle that can predict the future but are simply a way of allowing us to identify probable changes in trends and patterns earlier than we could otherwise do so. They are not infallible but if you combine them with the fundamentals and facts that you are already aware of they are a useful tool.

There is a huge difference in charting as used by short term traders to identify possible spikes and retracements and using charts simply as a means of monitoring market sentiment. I am not a trader, looking for short term profits but a mid to long term investor but I still use charting to monitor progress.
That is not to say I will not take opportunities to take profits or topslice (I will come back to that) along the way.

I will continue to look at other tools available for Technical Analysis because I believe the more you have at your disposal the more flexible you can be in your interpretation of share price movement.

Remember that a lot of the analysis tools we have been looking at are "lagging' in that they track movements that have already happened relying on those same repeating patterns to appear in the future to identify similar trend movements. They are not a prediction of the future and cannot see what is going to happen no matter what the most ardent chartists tell you.

The currency of chartists is probability not certainty, if it was the latter there would be no poor chartists around. Ultimately your best friend in investing is your own judgement and research. I cannot stress that enough, if there is one certainty it is that you cannot do enough research, not just into the company but to the political climate it functions in, global affairs and even the environment; something which future investors in oil plays north of the arctic circle are going to have to take very seriously indeed.

Next time I will get back to looking at more specific elements but I thought it worth taking the time out to look at the bigger picture, something we all lose sight of from time to time.


Next time:  Invest in people

A cautionary note, trading and investing in shares carries a level of risk, these blogs are only meant as a basic guideline to investing and trading, always do your own research and base your decisions on what you can afford to lose. This blog is not intended to provide financial advice as I am not qualified to do so, it is simply designed to provide information about how the markets work that might be of some help to private investors like myself.