The market is one of the most complex systems there is. Many generations of investors racked their brains in order to foresee the worth of a stock or bond, etc. and thus came up with different techniques.
One of them is chart analyzing which has grown in popularity continously since the 1970’s. I have always had a critical point of view on that kind of analysis. It just seems so unlikely that the complexity of the market can be measured in some simple trendkanals or certain chart formations. However most of my doubts where based on hear-say and what I picked up from some short tutorials on the internet. So I decided to order the much recommented “Crashkurs Charttechnik” by Markus Horntrich.
To sum it up: My doubts grew with every page I turned.
For example on page 36 the author states that “a chart is a aggregation of all mans trading decisons” and it is a “visualisation of all the information” on that value. This is an assumption that includes that all investors really participate but what if investors with volatile information do not participate in the trade. On top of that I believe the chart is also a visualisation of what the investors feel and how the dominant vibe on the market feels like. The chart could also be the result of a well played delusion.
In chart analysis everything is about trends and the recognition of such as soon as possible. Mr. Honrtrich describes three different phases of the basic trend:
1. Aggregationphase is described as when “well informed insiders buy”
2. Follower’s phase
3. Distributionphase as when the bigger part of the investors buy
What upset me about that especially are the so-called “insiders”. To me it seems like a fairytale that there is a selcted group of people that actually have enought money to influence the worth of a stock. The only way to do that in my opinion is to spread those “insider informations” between other investors or probably just get an analyst to write some crap that most of the morons out there seem to believe although most of them do not understand what is actually said.
Furthermore the author often uses phrases like “this works in most cases”. However he never says a word regarding any form of statistical proof and what is especially odd is the authors obvious denial of human emotions beeing part of a trading decision. As on page 40 on where is pointed out that “the trend concept is whensoever more succesful than listenig to your guts”. I hardly doubt that due to the lack of proof and the obvious involvement of emotions in the market. Or how can it be explained that the GM stock raises over 40 percent on one day? How could the Volkswagen stock raise over a 1000€ within a day.
Something similar is stated on page 42 regarding buy-/sell-signals: “There is a chance of the signals being wrong but it is still better than hope”. From my point of view it is hope that defines the market.
To me the hole chart analyses is based on emotional preconceptions since there is no statistical proof what so ever. I think that it sometimes works because the investors believe in it. When everyone sees a certain constallation as a buy-signal they will all buy and thus raise the course.
So there is a reason to get familiar with those techniques but I would not let the results be the main part of my trading decision. Simple logical assumptions are far more powerful. Not mentioning the financial status of the company.
(note: all quotes have been translated by the author of this article)
Winkler beschreibt ausreichend detailliert die Kennzahlen und diverse charttechnische Analyseverfahren. Ferner formuliert er Verhaltensregeln für den privaten Wertpapiertrader. Das Buch ist allerdings auch wirklich nur, dass was das Cover verspricht: Ein Schnellkurs. Tiefergehende Beschreibungen sucht man vergebens. Auch die durchaus häufig formulierten Zweifel an den Formen der technischen Chartanalyse werden komplett ausgeklammert.
Mein Trigonometrie-Brain

