How Do Traders and Investors Use Charts with Technical Analysis?

Michael N. Kahn, CMT

Charts are everywhere. We use them to keep tabs on how our children are growing, how to group ourselves demographically, and what the weather is going to be for the next five days. Whenever we show how something changes over time or how it breaks down into its component parts, we are using charts. In the investment world, we usually chart price movements over time. Technical analysis starts with this basic chart.

A Picture Is Worth a Thousand Words

Technical analysis is based on the premise that to know where prices are going, one must know where prices have been. In the early days of stock trading, the only way to know where prices had been was to read the ...