For most of my trading career, I have used ProfitSource charting software for much of my market analysis, but students are often surprised when I tell them that I also keep up some hand charts for markets that I specialise in.

Trading software provides you with up to the minute prices on just about any market you could ever want to trade and even if you go away for a holiday, your price chart will still be up to date when you get back in a week or a month or a year. This begs the question – why would you go to the trouble of hand-drawing each day’s or each week’s data onto a chart?

For a start, this is a great way to get to know a market and how it behaves. David Bowden, founder of Safety in the Market said that a trader should “know their market like a cow knows its calf.” Given David’s track record of calling major tops and bottoms in advance on his markets, that alone should be enough reason for us to give it a try.

Another reason to draw charts by hand is that it allows a connection to be made between the hand, the eye and the brain. It makes it easier to spot patterns in the market, particularly when they repeat. When a market chart is viewed on a computer screen, the computer will usually re-scale the image to fill the entire screen. During volatile months where markets make extreme moves, the computer will often “squeeze” the price scale so that it all fits on the computer screen. While this may not seem like a big deal, it makes a massive difference to a trader’s ability to recognise patterns as they are occurring or repeating. It is far easier if your charts remain the same size and scale.

A hand chart also gives you a much bigger picture perspective. These days, many of the news stories that you hear 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. Keeping a hand chart of weekly and perhaps monthly moves allows you to keep a big picture perspective.

Finally, I have found that the easiest way to identify the big picture cycles on 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 charting software to print out the chart up to the current date and then I simply update it on a daily basis from there. This is also a bit of “forced” discipline as the act of updating the hand chart forces you to pay attention to what the market is trying to tell you.

Now, just to be clear, I use a combination of software as well as hand charts. There are some tools and applications that are far easier, far quicker and just as effective using the software instead of laboriously drawing them by hand. I will always use hand charts, but I will also always use software!

If you would like to try out hand charting, there is a “Wall Chart Wizard” in ProfitSource software to get you started. My suggestion is to just start one hand chart at a time and get that one up to date before starting a second, third or fourth hand chart.

In trading, like in life, you need every advantage that you can get and a hand chart may just give you that extra edge you are seeking.

If you’re new to the concept of hand charting, this is something we teach in our Active Trader Program. 

The Active Trader Program is our foundational level course and is where all of our students start, no matter the amount of trading experience they have. Afterall, having a strong foundation (and tackling some of the bad habits you’ve developed along the way) is crucial to your long term success as a trader. You can find out more about our Active Trader Program here. 

Be Prepared!

Mathew Barnes