Is there any value in charts?

For some investors, charts are vital investing tools; others think they are as valuable as reading tea leaves. So is there really any value in charts? Tim Bennett investigates.

Charting divides investors. For some it's a vital investing tool. Others think it's little better than reading the tea leaves. But given that Anthony Bolton (Britain's most successful fund manager when he ran the Fidelity Special Situations Fund) has said that if he could only have one investment tool on a desert island, it would be a chart, we shouldn't be too hasty to dismiss it. So what's it all about?

Chartists believe investors act in herds when in doubt we follow the crowd. So investor psychology is predictable. That means that patterns of past behaviour captured by chart lines that reflect share price, currency, and commodity price movements should tend to recur. In other words, the past should be a fairly decent guide to future price action. All an investor has to do, therefore, is to watch for a familiar trend or pattern developing on a chart and then buy or sell just before the herd makes its next move.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.