Technician or Chartist? That is the Question
There is a common misconception out there that all technicians are chartists and vice versa. Way too often do I find myself having to explain to someone (who is supposedly a knowledgeable market veteran) what exactly a technician is or even does. A lot of people have no idea. We're not just out there looking for head & shoulders patterns...
Here is a brief except from John Murphy explaining the difference:
There are several different titles applied to practitioners of the technical approach: technical analyst, chartist, market analyst, and visual analyst. Up until recently, they all meant pretty much the same thing. However, with increased specialization in the field, it has become necessary to make some further distinctions and define the terms a bit more carefully. Because virtually all technical analysis was based on the use of charts up until the last decade, the terms "technician" and "chartist" meant the same thing. This is no longer necessarily true.
The broader area of technical analysis is being increasingly divided into two types of practitioners, the traditional chartist and, for want of a better term, statistical technicians. Admittedly, there is a lot of overlap here and most technicians combine both areas to some extent. As in the case of the technician versus the fundamentalist, most seem to fall into one category or another.
Whether or not the traditional chartist uses quantitative work to supplement his or her analysis, charts remain the primary working tool. Everything else is secondary. Charting, of necessity, remains somewhat subjective. The success of the approach depends, for the most part, on the skill of the individual chartist. The term "art charting" has been applied to this approach because chart reading is largely an art.
By contrast, the statistical, or quantitative, analyst takes these subjective principles, quantifies, tests, and optimizes them for the purpose of developing mechanical trading systems. These systems, or trading models, are then programmed into a computer that generates mechanical "buy" and "sell" signals. These systems range from the simple to the very complex. However, the intent is to reduce or completely eliminate the subjective human element in trading, to make it more scientific. These statisticians may or may not use price charts in their work, but they are considered technicians as long as their work is limited to the study of market action.
Even computer technicians can be subdivided further into those who favor mechanical systems, or the "black box" approach, and those who use computer technology to develop better technical indicators. The latter group maintains control over the interpretation of those indicators and also the decision making process.
One way of distinguishing between the chartist and the statistician is to say that all chartists are technicians, but not all technicians are chartists. Although these terms are used interchangeably, it should be remembered that charting represents only one area in the broader subject of technical analysts.
Also go read: What Does Technical Analysis Mean to You from April 6, 2012
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