Chart reading?

Weg

I'm curious why people are reading charts made from data of the past 2,3,4,5 decades. I can't see how those charts can be relevant in an era of economics with such changes which are remotely close to 1929-33.

cohodk

Not sure what you are talking about. Can you provide some examples?

Weg

The first time I started wondering about this was from different media, reading on-line, hearing on TV, ect. What hit me this morning was reading some threads here such as "PMs in full meltdown mode again".

Basically I wanted to see if many members thought the same about the relevance of charts now.

cohodk

Charts work well in all environments. What people have a tendency to do, which IMHO, is wrong, is to mix fundamentals into their chartwork. They try to rationalize why a chart looks the way it does, rather than reading it for what it is.

RedTiger

All markets are governed by the human emotions of greed and fear. Charts are often a good way to measure and quantify those emotions.

Charts are open to interpretation. In September 2007, the gold chart signaled a breakout from $700 to my eyes. When I posted that, at least a dozen other chart readers on this forum told me I was wrong and that that they saw "double top." Gold went up 40% in six months to $1030. In other cases, my interpretation has been wrong, and others have been right. Nothing is 100%. Some famous chart readers and book authors, such as Stan Weinstein, have a below-average real money track record, so charts don't always work.

Some old charts are useless because certain prices were fixed. Gold was fixed at $35 an ounce for decades. The U. S. dollar to U.K. pound exchange rate was fixed at $5 to one pound for decades. There were decades when Silver was tied to gold at a fixed ratio of 17 to 1. Citing these old fixed exchange rates will only confuse a person, because none of them are relevant after prices are allowed to float.

If you don't find charts useful, don't use them. Many folks scoff at a lot of things. The #1 stock market timer for 2008 uses astrology to trade, even though many market participants think astrology is a bunch of baloney. Fine--don't use it then. In the markets, the real money track record is what counts. The bottom line is that I don't care if others think charts are baloney, I find charts useful and will continue to use them.

Weg

RedTiger, thank you for your constructive responce.
Please understand the intent of my question is not to scoff.

Numerous times I have told my daughter that I always want to learn untill the day I die.
I'll try to rephrase the question.

It appears we are in an economic environment of which we have never experienced. Does the data used for charts still have any relevance as how PMs will move. I believe the data currently used is empirical.

Yes, different people use different methods in attempt to forcast. Myself, many times I simply use intuition. Which is bits of data from,,,,,,,,,, history. In this environment, my method is no more valid than any other. Sometimes an answer is found by process of elimination. An answer to the question may result in elimination, but will add to intuition.

cohodk

Does the data used for charts still have any relevance as how PMs will move

Yes, absolutely. But I think you are still trying to impart fundamental analysis into your chart reading. Forget about the fundamentals. Just read the charts for what they are. If the price is hitting higher highs and higher lows and the moving averages are pointing up then we are in rally mode. Follow the KISS principle....Keep It Simple...

The charts will reflect any enotional or fundamental analysis. If you try to impart your own emotions or fundamental analysis, you will more than likely blur the charts.

The best thing you can do is look at 1000s of chartss. Look at 50 every night before you go to bed. Eventually you will recognize patterns. These patterns will hold true whether it is a chart of gold, wheat, rainfall in the Amazon, or American Idol viewers.

MoneyLA

Frankly, I concentrate on charts of the previous 12 months. I find that charts going back several years are in fact useless. However, I am willing to examine long term charts because they can have some value.

But for immediate trading, only charts of the last 12-24 months have relevance.