Fibonacci and Gann Applications in Financial Markets

Charting and Difficulties: A Historical Perspective 43
The Gilt market is no longer priced in 32nds and the transfer of historic prices to
metric was laborious. Remember that 1�32 is 0.03125 so rounding errors have to
creep in for translation to decimal paper, which displays prices to two decimal
places, but the larger decimal can remain for electronic charting. The use of Imperial
pricing is not as confusing as it sounds as it has an interesting history. Before
price electronic dissemination of prices, deals were signalled by hand and could be
seen over fairly long distances, not just across a room. The big number (pounds or
dollars) was signalled with a tap on the head, half of that (1�2) signalled with a tap
to the ear, half of that (1�4) with a tap on the shoulder, half of that (1�8) with the
elbow, half of that (1�16) with the wrist and half of that (1�32) on the hand. This
gives the following: 1, 1�2, 1�4, 1�8, 1�16 and 1�32 and from combinations of
these signals all possible prices could be given. Even the way of writing the price
was interesting; e.g. 97 and three 32nds was 97-03, 97 and a half was 97-16. It was
indeed a sad day when it no longer became compulsory or necessary to be able to
turn a fraction to a decimal in the trader’s head.
It is my firm belief that some of the skills that paper charting instilled in the
novice technician have been lost with the advent of easy-to-use computerised charting
tools. Undoubtedly the possibility of using computer power to chart stochastics
and RSIs is a huge advance, but when it comes to the more ‘hands-on’ traditional
methods of charting, the art form of technical analysis has been overshadowed.
What has been lost? Most charting packages allow the analyst to store huge
amounts of historic data but here is where the problem lies: not all of it can be displayed
under a constant price axis. If you have more than 1000 days of information
then the package will oftentimes not be able to display this information. This is
compounded by some of the online charting tools where historical data are wiped
from the current viewing zone as many online systems have a limit to the number of
ticks, hours and days that can be stored. Unless the analyst has been using the chart
for a very long time (remember that 1000 days of information is just under five
years) then the market knowledge of what had happened before then becomes lost
as the long-term history has been wiped. Only rarely in my experience will a technical
analyst go back to looking at super-long charts, just because it is inconvenient.
I think this is dangerous behaviour in the long term. While there is no way I would
advocate a return to the old paper days, contemporary technical analysts have to
become aware of the pitfalls of screen-based charting.
As mentioned above, there are problems connected with the amount of data that
can be displayed. This was not the case with paper charting as all the data charted
could be seen at a glance – as long as there was room to unroll the paper itself! It
was much easier then to see what analysis had been done on the chart in the past,
especially if the paper chart was inherited, as was often the case. As a technical analyst
I like to think of each instrument I study as being a unique personality, with all