At a recent Gann Mastery Workshop in Sydney with elite Safety in the Market students, one of the topics that came up for discussion was hand charting. In an age where computers are doing more and more for us, is there really any value in drawing a market chart by hand?
I use ProfitSource trading software for much of my market analysis but students are often surprised when I tell them I also maintain a hand chart for some of the markets in which I specialise.
Trading software provides up-to-the-minute prices on just about any market you could ever want to trade and even if you go on holiday, your price chart will still be up-to-date when you get back, however long you are away.
So why do I go to the trouble of hand-drawing daily or weekly data onto a chart?
For a start, this is a great way to get to know a market and how it behaves more intimately. David Bowden, founder of Safety in the Market, said that a trader should “know their market like a cow knows its calf” and I have certainly found that I pay a lot more attention to every detail on a chart when I complete it by hand.
A hand chart is also a great way to identify cycles and patterns. A computer will usually re-scale a market chart to fill the screen. During volatile months when markets make extreme moves, the computer will often squeeze the price scale so that it all fits on the screen. While this may not seem like a big deal, it can make a massive difference to a trader’s perception and ability to recognise patterns as they occur or repeat.
In September this year, I will be presenting an online Currency Forecasting Seminar. We will cover three currencies that I trade in great detail, along with the patterns that they make and repeat. I originally discovered most of these patterns from my hand charts, which is one of the reasons I still maintain them.
A hand chart also gives you a much better ‘big picture’ perspective. These days, many news stories are written by journalists with access to charts that detail market moves for every minute of the day. There is so much detail for such a small picture, it is often hard to keep things in perspective. I have found that the easiest way to identify the big picture cycles in a market is to see them on a large hand chart rather than a computer screen.
Hand charts don’t need to be drawn from scratch. Most of the time, I use ProfitSource to print out the chart up to the current date and I simply update it on a daily basis from there. I have found the forced discipline of updating a hand chart makes me to pay closer attention to what the market is trying to tell me.
Now, before you go and throw out your trading software, let me reiterate that you cannot keep a hand chart for every market you trade. And you still need to source market data. I use ProfitSource to track multiple markets and - more importantly - to conduct my analysis using tools such as angles, squares, resistance cards and pressure point milestones.
If you would like to try out hand charting, there is a ‘Wall Chart Wizard’ in ProfitSource to get you started. I suggest you create one hand chart initially and get it up-to-date before starting a second, third or fourth.
In trading, as in life, you need every advantage that you can get and a hand chart may just give you that important, extra edge.