Chartist
Also written Technician
A trader who bases buy and sell decisions on historical price and volume patterns and their tendency to repeat, rather than on a company's underlying financial performance.
In plain language
Some market participants study a company's business before buying its shares. Others study only the chart.
A chartist is the second kind — the workbook uses "chartist" as another name for a technician, someone who believes patterns in past price and volume can forecast where a price is headed next, without reference to the business behind it.
How it works
The workbook: "Technicians (sometimes called chartists) believe that market activity will generate indicators in price trends that can be used to forecast the direction and magnitude of stock price movements in future." It adds a specific technique chartists lean on: "chartists use moving average of the price of the stock to reduce the impact of day-to-day fluctuations in prices that may make it difficult to identify the trend."
This sits inside a broader set of definitions the workbook draws in the same paragraph — a trader profits from the spread between buying and selling price without needing the underlying value to change; a speculator specifically bets on short-term price movement; a day trader completes an entire buy-sell cycle within one day. A chartist is defined by the method (price and volume patterns), not by the holding period.
A worked example
Illustrative. A chartist studying a stock's 50-day moving average notices the price has bounced off that average three times in the past six months without breaking below it. On the fourth approach, the chartist buys near the average, expecting the pattern to repeat — without checking the company's latest quarterly results at all.
A fundamental analyst looking at the same stock would instead check its revenue growth, margins and balance sheet, and would be entirely unmoved by where the price sits relative to its moving average.
Why NISM asks about it
Chapter 4.1 and 4.3 define chartist alongside trader, speculator and day trader in the same discussion. Expect a question distinguishing these related terms, and one linking chartists to the use of moving averages to filter out short-term noise.
Common exam traps
- A chartist is not automatically a day trader. The workbook defines them separately — a chartist relies on price patterns and charting technique, which can be applied over any time horizon; a day trader is specifically defined by completing the entire investment and disinvestment cycle in a single day.
Check yourself
1.A market participant completes his entire investment and disinvestment cycle within a single day. The workbook would term him a:
- a)Chartist
- b)Speculator
- c)Day trader
- d)Passive investor
Show the answer
Answer: (c) Day trader
The workbook is explicit: if their entire investment and disinvestment cycle is 1 day, they are day traders.
Why not the others? A chartist is defined by depending on price patterns and related charting techniques — the stem says nothing about charts. A speculator is defined by betting on short-term price movement based on a calculated guess — again, not the feature described here. A passive investor buys a broad set of securities representing an asset class and does not trade individual names at all.
All of these participants are traders in the wide sense. The exam expects the most specific label the stem supports, and the stem hands you the one-day cycle.
2.In technical analysis, the impact of day-to-day fluctuations in prices is smoothened by which of the following?
- a)Increasing the time period of price charts
- b)Using a liquidity parameter along with prices
- c)Using moving averages
- d)None of the above
Show the answer
Answer: (c) Using moving averages
This is one of the workbook's own sample questions. The text states: typically, chartists use moving average of the price of the stock to reduce the impact of day-to-day fluctuations in prices that may make it difficult to identify the trend.
Option A is the designed trap — stretching the chart period changes what you see, but the workbook names the moving average as the smoothing device. Option B invents a technique the workbook does not describe; volume, not liquidity, is the parameter technical analysis pairs with price, and volume is used to confirm trend strength, not to smooth fluctuations.
3.Kartik buys shares of a pharmaceutical company because he expects its new plant to raise cash flows for five years without a proportionate increase in the risk of the business. Rohit buys the same share because it has bounced off the same chart level three times in six months. Which classification is correct?
- a)Both are investors, since both intend to hold the share
- b)Kartik is an investor and Rohit is a trader
- c)Kartik is a trader and Rohit is an investor
- d)Both are speculators, since neither outcome is certain
Show the answer
Answer: (b) Kartik is an investor and Rohit is a trader
Apply the workbook's mechanism, not the holding period. Investment activity focuses on the potential of an asset's value to increase, and value increases when the asset generates higher cash flow without a proportionate increase in risk, or when risk decreases without a proportionate decrease in the cash flow. Kartik's reasoning is that sentence almost word for word — he is an investor.
Rohit expects a spread from a repeated price pattern, with no necessary change in the underlying value of the asset. That is the workbook's definition of a trader — specifically a chartist, since he is reading a chart level.
Option A is the classic error: assuming intent to hold makes someone an investor. The workbook classifies by the source of expected profit, not by duration. Option C simply reverses the two. Option D misuses "speculator", which the workbook reserves for traders betting on short-term price movement on a calculated guess — not for anyone facing uncertainty, which is everyone.
Where this is taught
Free preparation for NISM Series XVRelated terms
- Bar chartA technical-analysis chart showing each period's Open, High, Low and Close as a single vertical bar with side ticks — used to study price range and volatility.
- Moving averageThe average price of a share over a rolling window, recalculated each session — it smooths away daily noise so that the underlying trend, and changes in it, become visible.
- Technical analysisForecasting price direction from past price and volume alone, on the assumption that everything worth knowing about a company is already in its price.
- TraderA market participant who profits from the spread between buying and selling price without needing the underlying value to change — motivated by price patterns, not by a company's fundamentals.
- Day traderA trader whose entire investment and disinvestment cycle is completed within a single day, taking no position home overnight.