More accurately known as a technical trader or a technical analyst, the chartist engages in the activity of preparing graphs and charts in order to predict future trends in the market. Historical financial data is utilized as the basis for the charting activity. A chartist can collect data on any stock, bond, or commodity and plot the information into a pattern that can easily be understood by just about any investor.
Chartists contend that by graphing the past financial activity of a given security that it is possible to identify recurring trends. Part of the process will mean identifying the intervals between the rise and fall of the value per unit as well as the actual rise and fall of the price. This strategy is considered by the chartist to make it possible to determine when to buy or sell the security so that the investor manages to grow his or her portfolio rather than taking a hit when the unit price begins to fall.
While the chartist is considered to be essential to the task of understanding the historical aspects of the market, not all investors believe that the use of charting alone will yield enough information to justify a particular transaction. Other financial analysts tend to incorporate other factors as well, such as political and economic shifts that may or may not have existed in the past.
Still, the work of the chartist can add a much-needed element to understanding past market trends. When dealing with a relatively stable security, the information that is compiled and presented by the chartist can be extremely helpful in planning future investment activities. However, it is important to note that the work of the chartist will be most effective when addressing trends in a market sector that has not seen any real changes in the supply and demand ratio for that market. In addition, the potential for severe changes in the political and economic condition of the market should be minimal in order for charting to be truly reliable and effective.