Chart to Chart

[peterbirks]

Several people in the past have expressed something akin to amazement when I say that my main instruments when trading currencies are charts. One person likened it to ancient alchemy, lighting candles at a full moon and singing the praises of pagan gods.

And, at times like these, it's true; charts are worse than useless. This is a volatile reactive market driven by news and rumour. The nearest that you could get to an efficient chartist trading technique would be on a minute-by-minute basis.

But, most times are not times like these. Most times, there are a very few people trading for 'ordinary' reasons (i.e., as part of their business process, that business being something where goods and services are bought and sold in two different currencies and a trade in those currencies needs to take place in order to defend against adverse currency movements affecting the 'real profit) and a lot of people just punting like fuckers. 95% of the time, movements in currencies are due to a bunch of gamblers out there taking a view.

Well, that's not too different from poker. All you need to do is make the move that quite a few other people are going to make a few minutes later.

And charts, curiously, are very helpful in telling you when a bunch of people are likely to make a move in a few minutes', a few hours', or even in some cases a few days' time. How you actually do this is no easier to explain than it is to define why you make a particular play at a particular moment in a poker game, a play that you would not normally make. The chart is your basis, but your actual decision is based on far more nebulous stuff.

Anyhoo, at the moment, all that is just so much bollox. Today's rapid fall of sterling against the dollar (and all movements in the past few weeks) had nothing to do with charts and resistance levels and everything to do with reality. You have to know when to throw the carts away, and now is one of those times. Charts function in the absence of any other news. They work because people believe in them (a virtuous circle, if ever there was one). They feed off a kernal of fundamental value and cause movement around that value.

At the moment, news is far from absent, hence the inaccuracy of any chartist analysis.

However, the movements in the past few weeks can (and will) be used in vaarious future stats to show that all chartist analysis is bollocks. That, too, is a flawed analysis.


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Update: 6.50-pm. Bail-out Bill defeated in house. Uh-oh....

PJ

Comments

[real-aardvark.livejournal.com]

This is indeed getting to be farcical.

I read your update, two hours on, and searched the web for the real info. No such luck. I had to wait for the ten o'clock news to get anything resembling the garbled reality.

Is it actually the case that this, your, blog is now the centre of both sensible and accurate analysis of the financial world and late-breaking news therein? Should you be starting an investment bank, or preferably a think-tank (I notice that those don't seem to go bust, no matter how asinine their comments or predictions might be)?

Well. It's just a thought. I'll design the website for you. (And it won't look like this one. Too much last year, my dear.)

In other news, I had a very pleasant time at the Magdalen 25th anniversary Gaudy, and thank you for asking. First time I've worn a DJ for twenty years. Also the first time I've hired one from Moss Bros rather than Oxfam, which must mean that I'm going up in the world, or bankrupt, or both. Sitting opposite my (now) 91 year old tutor was a pleasure, which I hope (but do not expect) to repeat. To my right was a failed actor, now corporate lawyer: as you would expect. He was in the year below me at KES B'ham. We differed on the effect of Howe's 1981 budget on the West Midlands. As a corporate lawyer with no other sound basis, his attack was ad hominem. "Now, Peter, we both remember Red Robbo, don't we?"

I don't think my response, along the lines of "Yes, I do. The last best chance for Longbridge to run an end-around on incompetent middle management, ludicrous underinvestment, and government incompetence" was quite what he wanted to hear. Then again, he's a dickhead (even though he was in my house at school, and number two on the chess team).

Corporate lawyers, gotta love them. Hedge fund managers, it is to laugh. We probably had one or two of those at the Magdalen Gaudy (150 graduates; one drunk and pathetic College President begging for donations; one US Senator; one Luke Johnson -- did not turn up, otherwise engaged -- one Professor Niall Ferguson, who in the memorable words of the utterly pissed President of my college grew up "in colonial Kenya, waking up to an African sunrise, watching leopards speed across the savannah, whilst he sucked on the fresh juice of an over-ripe mango. This, and the Magdalen Empire, made him the historian he now is."

I wish I was exaggerating. I'm not. However, the Chasse-Spleen '97 was really rather good. I eschewed the Grahams '77 in favour of the not-quite-Yquem of the same year, which turned out to be a not-quite-Yquem. The choccy bikkies were nice, but the informal "mixer," where I sat at a largely vacant table populated by Rhodes Scholars engineers from Harvard was not.

Had a good old rant with the lads from the kitchen, out by the red phone box which is the only place where one can smoke (Magdalen not being a palace, which I think is an oversight in the legislation).

I might turn up in another twenty five years time.

Now, what about China?

[real-aardvark.livejournal.com]

PS: Kenya gained independence on December 12, 1963. I was born almost exactly two years earlier. Niall, or as we like to think of him, that stout-hearted representative of the Ayrshire working class, was presumably born at the point of independence, since he was two years below me and I was the youngest in my year.

Nice to know that, even in 1963, you'd be weaned on mangoes rather than adulterated Chinese milk powder.