You Don't Need Charts To Trade

Bit of a strange heading that, for someone who is purely a technical analyst. I mean, I might get out of the market when a major announcement is coming up, but I don't use any kind of fundamental analysis for my trading. I use a very short time-frame to be worried about the long-term trend.

So what do I mean by "you don't need charts"? If I'm a technical analyst, surely charts are the *only* thing I need?

What I'm talking about, is using charts to develop new trading systems. You don't need the chart for that. In fact, you'll just be wasting a lot of time.

What do we do when developing a new trading system, or determining how good someone else's trading system is? Well, I'll tell you what I do. I pull up a chart. I add the indicators to it. I run my mouse across the screen from left to right, and say in my head when that system would have bought and sold. I look at the approximate prices and judge if it made a profit or loss.

Kind of like "hmmm... entry... about 1.1405... still in... still in... exit there for a loss of about 20 pips... then entry..." Etcetera, etcetera. Maybe I do that for about 10 minutes. I change the indicator settings a bit, do it again, add another indicator to see if it gets better. Repeat. I'm doing that for about an hour.

I'm looking at about 300 bars of history. Whatever the results are, I can't trade based on the evidence I've just gathered.

So I punch the trading system into my software. I click the Start button, and it tells me the results, the exact results, working with about 2000 bars of history, in 2 minutes.

I change some settings and click the Start button. Another 2 minutes later I get the exact results. Repeat.

I've now performed a much more thorough analysis, obtaining the exact pip win/loss, and finding the best settings for that system for that currency and timeframe, all in about 15 minutes. I don't need charts to do to this. If I have an idea, I just punch it into the software and click Start. Who cares what the chart looks like?

And who cares what "makes sense"? It costs nothing to backtest like this. Conventional wisdom has it that the price closing above a simple moving average, for example, is a buy signal. Go long. Create that system. Test it. With a few clicks of the mouse, change the system so that you're going short when this happens. Test that. The result is better - keep it that way. It's worse - change it back.

Add another indicator. The result is better - keep it that way. It's worse - change it back. It doesn't matter what the indicator is, if it goes with conventional wisdom or not, if it's another trend-following indicator and you've already got 2 trend-following indicators.

The result is better - keep it that way. It's worse - change it back. Looking at charts to do this stuff will just waste your time.