I am Both a Technician and a Chartist.

JC Parets
August 15, 2021

"Technician" vs "Chartist"

These are two terms that are often used interchangeably: Technician and Chartist. But many times it’s wrong to do so. You see, all chartists are technicians by definition, but not all technicians are chartists.

What is a chart?

For me, a chart is just a visual representation of the changes in equilibrium between supply and demand.

That's all it is.

We don't have to pretend it's something that it's not.

How the chartist interprets the data on the charts is where the skill and experience comes in. The chart alone won't do much for you, in the same way that a carpenter is way better at using his tools than I could ever be.

What is Technical Analysis?

To me, Technical Analysis is the study of the behavior of the market, and therefore market participants, as opposed to the goods and the services in which a particular market deals.

We refer to the latter as "Fundamental Analysis", which we don't find helpful at all.

In fact, I've heard before that it shouldn't be Technical or Fundamental, but that these two disciplines should be used together.

But I'll happily take the other side of that. Because any amount of time used for funnymentals can be used to do more price analysis and technical work. We all have a finite about of time to do our analysis. So we want to be as efficient with that time as possible. And by completely ignoring the fundamentals of companies, it gives us a huge advantage.

Besides, in Crypto, for example, there are no fundamentals. These are not companies. They do not have earnings or cash flow. It's purely a supply and demand game.

Could you imagine trading crypto and ignoring price?

With that in mind, could you imagine investing in anything and ignoring price trends?

I cannot.

You are welcome to.

I'm not here to tell people what to do. We're only here to share what we do.

I just want to make that perfectly clear.

Also, I'm sure some of you have some anecdotal evidence or some story about how fundamentals helped you this one time or even several times. I just want to make sure you know that I don't care. At all. So please keep it to yourself.

If you have some success stories from following price, I encourage you to share those with us! We love hearing from you.

For today, I'll just leave you with some wise words from one of my favorite Technicians.

Here's a snippet from John Murphy's Technical Analysis of Financial Markets:

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.

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.

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I hope this helps give you some perspective about Technicians and Chartists, and whether you're one, but not the other. Or if both terms fit your process, like they do for us.

I am a Technician and a Chartist. And happy to be both. I find it to be incredibly helpful for identifying trends and managing risk. And if your goal is to make money in the market, then both of those skills can be huge assets.

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