By Afzal Lokhandwala
In a world increasingly shaped by data and algorithms, one enduring question in investing refuses to fade: Can you really predict market movements just by looking at charts?
Also known as technical analysis, chart reading studies historical price and volume patterns to identify trends, reversals, and key decision points in the market. To some, technical analysis is a powerful edge — a visual language of supply, demand, and sentiment. To others, it’s little more than financial astrology.
The skeptics argue that charts merely reflect history — not intrinsic value. The view is that technical analysis ignores the real backbone of investing: the business itself. A chart, they argue, can’t tell you how strong a company’s brand is, how competent the leadership is, or how stable its cash flows are likely to be. This belief rests on the principle that while price movements can be dramatic, an investment’s long-term value is ultimately tied to the strength, stability, and predictability of its underlying business.
The critique isn’t without merit. Technical analysis can be misused. Many new traders jump in, hoping to predict the future from a few candlestick patterns, unaware that most chart-based indicators are reactive, not predictive.
Yet on the other side stand traders who argue that price action is the ultimate truth — reflecting all known information, expectations, and sentiment. Before news breaks, they point out, the stock often moves. Charts, they believe, help reveal this early. Patterns repeat because human behavior repeats. For them, markets move in trends — and only through charts can those trends be identified and ridden.
Technical traders don’t claim they can predict the future with certainty. They lean on probabilities, risk-reward setups, and structured discipline. The chart is not a crystal ball — it’s a decision-making framework.
The debate around charts is less about whether they work and more about how they are used. A compelling testament to their potential is the performance of traders who have posted audited triple-digit annual returns in competitive investing championships — proving that disciplined chart reading can translate into consistent results.
Proponents believe charts help decipher what the market thinks about a stock because price — not intrinsic value alone — drives returns in the real world. Charts can reveal where the big money is flowing, provided one knows how to read price and volume properly. What sets technical analysis apart is its ability to offer both timing and selection. Fundamentals may highlight strong businesses, but charts help traders see when buying interest is actually turning into sustained price momentum.
In fast-moving markets, this ability to spot demand can make all the difference. For believers, the goal isn’t to buy at the cheapest price but at the right time — when the stock is ready to move. Charts, they argue, help show exactly that.
(Afzal Lokhandwala is the 2022 United States Investing Champion and the founder of Afzal Lokhandwala Champions Club)
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