What Is a Chartist?
A chartist is an individual who uses charts or graphs of a security's historical prices or levels to forecast its future trends. A chartist essentially looks for well-known patterns such as head-and-shoulders or support and resistance levels in securities so as to trade them more profitably. Chartists ply their trade in all markets where financial instruments are traded—equities, currencies, commodities and bonds.
A chartist is also known as a technical analyst. In general, a chartist is not looking at fundamentals when making a trading decision. However, there are some that combine fundamentals to their process.
Chartists generally believe that price movements in a security are not random but can be predicted through a study of past trends and other technical analysis. A chartist may or may not combine fundamental analysis with technical analysis when assessing whether to buy or sell a stock or security. Those who combine both disciplines maintain that while fundamental analysis helps in deciding which stock or security to buy or sell, the optimal application of technical analysis is in deciding when to buy or sell the stock or security.
Generally, chartists will use a combination of indicators, personal sentiment and trading psychology to make investment decisions. Historically proven patterns and trends are the central focus for identifying buying and selling decisions. Envelope channels, and specifically Bollinger Bands, can be one of the most reliable pricing patterns a chartist will look to for investment signals.
Overall, chartists have a wide range of patterns and signals they can follow to support their analysis. Serious chartists can seek to obtain the Chartered Market Technician designation which is sponsored and written by the Market Technicians Association.
Chartists rely on technical analysis trading systems that form the basis for their investment trades. Since many technical analysts are day traders, these systems are typically targeted to individual traders. Chartists have a variety of options to choose from with many programs available through brokerages. Brokerages will often include comprehensive charting software with featured charting patterns in their service offering. Many advanced chartists however, choose to obtain charting software from independent vendors which allows them to have access to the full range of available charting patterns.
Some of the most popular independent vendor chartist platforms include: MetaStock, Worden TC2000, eSignal, NinjaTrader, Wave59 PRO2, EquityFeed Workstation, ProfitSource, VectorVest and INO MarketClub.
Generally, all of these platforms offer a broad array of customizable charting patterns. Platforms will vary based on the particular markets they serve and the additional information they can provide such as integrated news feeds and fundamental data.