In August of 2011 I moved to Greenwich Village Manhattan and took a job with the Market Technicians Association, now CMT Association®. It was less than a month after I started that Ralph Acampora, CMT Phil Roth, CMT and Bruce Kamich, CMT came to the office at 65 Broadway. We assembled in the conference room which housed a library of technical analysis books, newsletters, and was covered on two walls with hand drawn charts of the Dow Averages.

I had just finished my MBA from Indiana University’s Kelley School of Business. Like most Universities around the world, my studies were firmly grounded in fundamental views of investing. I studied managerial accounting, operations & supply chain management, corporate finance and a broad array of business and product management subjects. What I didn’t know was how markets actually worked. Technical analysis was only mentioned favorably once during a quantitate finance course. We covered a lot of statistics and some concepts like regression analysis. That professor mentioned off-hand in one lecture that there was a whole field of research known as technical analysis which could be an area for our own further study.

Seeing the passion and expertise of the early members of the MTA got me excited to learn this new vocabulary and dig into the vast array of tools used to better understand charts. I must admit my own skepticism of classical pattern recognition at first. “Flags, Pennants, Head and Shoulders, Cup & Handle formations…” all sounded a bit suspect given how thoroughly steeped I was in accounting-based valuation measures. But the basic concept of price trends and the varying methods of confirmation or divergence made sense mathematically. I was blown away by the permutations and many parameters available to just moving averages; simple, exponential, multiple period moving averages and the interplay that unveiled so much about price action.

From there, the concept of momentum really drew me in. As a complete novice, I didn’t get much beyond Welles Wilder’s RSI before thinking I had cracked the code of all financial markets! (The hubris of 20-something MBAs is really the 8^th wonder of the world.) But I distinctly remember wanting to show Ralph that I knew something about the subject to become a closer part of the community.

He was showing us some of his slides from the New York Institute of Finance lectures he had given for more than 40 years, and I pointed out an overbought RSI on the chart and said, “hey, there’s a sell signal!”

Remember, we had only just met, but Ralph has an endearing spirit that makes everyone feel as though you’ve been a part of his family for years. He smiled graciously and came over to the edge of the conference table and half sitting, he told a personal story to help educate our little non-profit staff. He began:

“In October 1969 I took my second job on Wall St. working with Alan Shaw at Harris, Upham & Co. One of the reasons I was hired was because I was very efficient and knowledgeable in plotting and interpreting point and figure charts. I was responsible for maintaining a huge library of stock charts along with walls of daily stock market indicators. Alan’s chart room was the envy of all other firms on Wall Street.

The Director of Research at the time was Ralph Rotnem who would regularly poke his head into the chart room, stare at the wall chart for a brief time and then continue on his way without saying anything to me. One day, I stopped him and asked: “Mr. Rotnem, what are you staring at when you peak into the chart room?” And Rotnem said: ”I am just looking at the colors!” So, I prodded further: “Colors?”

Whenever the market indicators went into oversold territory, we plotted them in green and whenever the market went into overbought territory we plotted it in red. Rotnem continued by saying: “If I see lots of green, then I know we are in trouble and if I see lots of red, then I know the market is really bullish! Obviously, this reading was counter-intuitive to the basic reading of all charts in Western markets. Seeing my confusion, he continued…

Oversold is like a beach-ball under water – when you let your hand go, the ball pops……but, if the ball stays under water after you take your hand off of it…you have a seriously troubled beach ball – the market is in trouble!”

This anecdote from Ralph profoundly changed my thinking about all technical indicators. The point is that technical analysis is mathematical, objective, and scientific but understanding the information, interpreting the data, and taking responsible actions as an investor requires an analyst to view the context of each signal. If investing is both Art and Science, then the art comes from experience in applying the tools. Perhaps leaning too heavily on the mathematical aspects is why the broad majority of quant hedge funds suffer massive losses every time the market has a major regime shift.

Now, when I see overbought signals in a persistent uptrend, I know that the market is exhibiting bullish enthusiasm, but see the same overbought signal as price approaches important resistance areas as a sign of caution and potential trend exhaustion. Context matters.

The lesson went even deeper. Because Ralph exposed his own learning curve with this discipline, he absolved me of my embarrassment. Traders must remove the stigma from early mistakes. Mistakes are how we learn. And yet, surrounding yourself with veteran practitioners is a great accelerator to understanding technical analysis – certainly much less costly than trial and error in isolation. Trading can be a lonely pursuit, but the CMT Association provides a community that is collegial, supportive, and full of the absolute experts in this field. For that, I am grateful to be a Member and CMT charterholder.

I have spent nearly all of my 25-year Wall Street career working on a trading desk.  While the incessant, deafening screaming largely has been replaced by sophisticated technology, human nature has remained a constant.

I clearly remember my first day as a summer intern in 1995. I was among two-dozen college students accepted to work at a top brokerage firm.  Upon receiving our IDs, we walked wide-eyed into a vast auditorium and were given our orders:  work hard and learn as much as you can in the most exhilarating environment you will ever witness.

From there, we were off to our assigned departments, which were scattered all over the mid-town Manhattan skyscraper. I would be working for the domestic equity sales trading desk, and I was excited to get started.

I vividly recall getting off the elevator that first day, opening the shiny glass doors and hearing the roaring crowd.  The only experience I could relate it to was a professional sporting event.  The big difference was that the clamor never died down on the desk. It was unceasing.

I had just finished my sophomore year in college and had gotten used to being around people all day… or so I thought.   When I needed to focus, I simply gathered my books and found a quiet, calm setting to work.  And then it was back to the fun and craziness of dorm life.

The “old school’ trading floor offered no such outlet.

My heart raced, and nervous adrenaline pumped through my veins. A trading assistant, Marly, led me to my spot on the desk.  Phones rang piercingly all around me, and they never seemed to stop. 

Marly was speaking a mile a minute, explaining what would be expected of me, but I only digested about 10% of it.  The whole experience already was overwhelming.

Soon after showing me to my space, Marly magically lit up my phone turret with a few clicks of her fingers.  The turret instantly erupted with all sorts of sparkling lights and blaring sounds. She then cranked the volume level louder and louder… Marly was thrilled. I was not.

I spent the next few hours meeting 20 senior sales traders. My main job was to answer the phone as quickly as humanly possible, yell for whoever the client asked for and to KEEP yelling until they acknowledged me.  For an admitted introvert, this was exceedingly beyond my comfort zone.

The worst headache of my life quickly ensued, which lasted for what seemed like an eternity. That was the longest day of my life, and I never wanted to go back.

But I did… every day for 10 weeks, commuting two-plus hours each way to and from upstate New York… and it ended up being the best summer of my life. In fact, I was offered to come back the next year, which I quickly accepted.

That summer also was my first true experience “inside” the financial markets.  The internet boom was just beginning, and the 1995 (never-ending) uptrend was in the early stages.

Wanting desperately to learn, I asked everyone I met their thoughts, and nearly all of them doubted the market’s longevity.  As one veteran sales trader smugly stated as the S&P 500 went up seemingly every day, “this is ridiculous.”  The market had other ideas, of course, advancing for another four and a half years before the bubble burst.

Since then, I, too, have thought that various trading environments were “ridiculous.”  But as every technician can attest, the market never cares what we “think.” 

Through it all, I’ve learned that adapting to change is much more fruitful than resisting it.  That’s true for the financial markets, and, more importantly, it’s true for life.