In the book Getting Started in Technical Analysis, author Jack Schwager outlines some of the benefits of using charting models for financial transactions as follows:
  • A chart that provides a brief history of market prices. Price history is an essential tool to provide information to any trader or investor.
  • The chart provides the trader and investor with the best sense of market price fluctuations - a very important factor in assessing risk.
  • Charts can be very effective tools for fundamental analysts. Long-term price charts allow fundamental analysts to quickly isolate periods of notable price movements. By investigating the fundamental problems or special events associated with that period, the fundamental analyst can identify the key factors that are impacting the market at this moment. That information can be used later to build price habit patterns.
  • Charts can be viewed as a tool for timing tool, even when a trader makes trading decisions based on other information (e.g. fundamental analysis).
  • Charts can be used as capital management tools by helping to identify important and realistic order stops.
  • Charts reflect market habits subjectively through repetitive patterns. With certain experience, a trader can discover the possibility of effectively using charts as a tool to predict market movements.
  • Understanding charts is a prerequisite for building a profitable trading system based on technical analysis.
  • Skeptics should note: in some isolated cases trading in contrast to the normal chart patterns can provide profitable trading opportunities.
So we can see that even though brothers trade in a different method (fundamental analysis for example), charts and chart patterns can help us. Besides, using simple chart analysis without any other method can still be profitable for a trader in the long term.