The Financial Chart: A Tool, Expressive Visual Object and Performative Agent

Financial charts are one of the most popular and common investment tools used by investors on capital markets. As such, they serve to analyze and detect potential investment opportunities. In detail, they allow investors to see trends in the price movements of financial instruments and, consequently, capitalize on them by joining the trend. Moreover, they allow investors to define so-called support or resistance levels and thus identify the right time to take a position in the market. Furthermore, they give investors the possibility of comparing different financial instruments in terms of a certain variable, and to choose the one that is more attractive for investment. To this should also be added that, thanks to financial charts, investors can quickly and easily find out what sentiment prevails on the market and, depending on this knowledge, make a specific investment choice (e.g., buy, sell or hold shares). Thus, financial charts are evidently useful investment tools without which it would certainly be more difficult for investors to analyze the market and detect potential investment opportunities.

Referring to Bruno Latour’s theory of graphism, it can be said that financial charts are especially useful tools for investors because of specific features such as readability, scalability, combinability, immutability and mobility.¹ As a readable device financial charts are capable of rendering complex financial data sets into easily apprehended images that exploit the human capacity for perceiving visual patterns (see Figure 1). In turn, as a scalable device, through simple alterations of scale, they can make visible a variety of market phenomena that are otherwise invisible, because, for example, of their duration (see Figure 2). Further, as a combinable device, financial charts can reveal novel connections between seemingly unrelated market phenomena and encourage abstraction from details to generalities by facilitating comparisons between different financial data sets (see Figure 3). Moreover, as an immutable device, they serve to stabilize ephemeral financial events by transforming them into relatively permanent traces on the visual display (see Figure 4). Finally, as a mobile device, financial charts can be taken from one place to another allowing investors to analyze the market from anywhere in the world. It’s these specific features of financial charts that make them so useful as devices for investors on capital markets.

However, as is argued here, financial charts are not only useful investment tools for analyzing and detecting potential opportunities in capital markets, but also expressive visual objects and performative agents. The former means that investors see financial charts not only in an informational way, as a set of abstract lines, shapes and figures, which in certain configurations create signals to buy or sell financial instruments, but also in other, more expressive ways, in which abstract lines, shapes and figures turn themselves into specific objects, things, animals or phenomena such as a mountain peak, a speeding car, a lurking animal, or an overflowing river.² The latter, in turn, means that financial charts are not a passive and neutral record of financial exchange that takes place on capital markets, but rather that they are active actors shaping this exchange. In addition, financial charts not only shape the aforementioned exchange, but also contribute to the constitution of the financial market as an empirical object that can be directly perceived and, consequently, managed.

All these things—the expressiveness of financial charts along with their performativity—show that they, and from a more general perspective that which is visual, are very complex elements of capital markets, much more so than is usually assumed. In addition, they show that financial charts are also a very important element of these markets, again, much more than is usually indicated. They are not only investment tools, but also expressive visual objects and performative agents.

The Financial Chart as an Expressive Visual Object

Nelson Goodman, individuating five symptoms of the aesthetic and among them relative repleteness, contrasts a single-line drawing of a mountain by Hokusai with the same line as a chart of daily stock market averages, emphasizing that whereas in the former every feature of shape, line, thickness, etc., counts, in the latter all that counts is the height of the line above the base.³ In making such a contrast, he seems to suggest that financial charts are devoid of multiple and complex meanings and references, and that they are seen by investors only in an informational way. Of course, such seeing can differ in the sense that it can take one of the forms of seeing distinguished by James Elkins and Erna Fiorentini—staring, peering, glimpsing or glancing⁴— but this does not change the fact that financial charts are inexpressive objects to be seen only in a one-dimensional way. In other words, it does not challenge the idea that when investors look at financial charts they see nothing more than abstract lines, shapes and patterns that sometimes create buying or selling signals.

I think that such a view—that financial charts are exclusively “notations, and not images in a deeper sense”⁵ and, as a result, are only seen by financial agents in an informational way—is demonstrably untrue. In fact, financial charts are expressive visual objects that are replete with a great range of meanings, and as such they can be seen in different ways and modes, not only in an exclusively informational one. For example, they can also be seen in a naturalistic way, that is, as a naturalistic landscape that depicts the aforementioned mountain, car, animal, or river, or a smiling model.

There are several reasons to think this way about financial charts. Firstly, as is emphasized by James Elkins, “there is no such thing as an image that merely provides information.”⁶ To put it another way, “no image is inexpressive [and] even the simplest diagram can be replete with meaning.”⁷ Extending this thesis, James Elkins adds that “nonart” images, that is, graphs, charts, maps, geometric configurations, plans, technical engineering drawings and so on, are not only expressive objects but fully expressive objects.⁸ This is because they have affective, historically grounded meanings because, according to Elkins, “[w]hat happens in nonart images can be just as full of artistic choices, just as deeply engaged with the visual, and just as resourceful and visually reflective as in any painting, even though its purposes may be entirely different.”⁹ To be more specific, “nonart” images, such as financial charts have affective meanings mainly due to the fact that they are produced according to aesthetic ideals.¹⁰ As a result they are provided with aesthetic elements or properties that generate different effects in the sense that the presence of these properties enables images concerned with data analysis to signify meaning more freely, that is, to produce more expressively nuanced images.¹¹ In turn, informational images such as financial charts have historical meanings simply because they are products of certain historical theories about images and about the world, as well as of certain historical conventions.¹² With shifts in these theories and conventions, the meanings of images and ways of seeing them themselves change.¹³ Moreover, financial charts have not only affective and historical meanings, but they also have that which James Elkins calls a “pictorial remnant.” Importantly, this pictorial remnant is present not only in elaborated scientific images, but also in the driest informational images such as stock market graphs.¹⁴ Thus, financial charts as examples of “nonart” images are not devoid of expressive and pictorial dimension, and the presence of this dimension allows them to be seen as something more than only a “container of financial information.”

Secondly, financial charts are expressive visual objects that can be seen in different ways, since they can contain combinations of what Nelson Goodman calls “routes of reference.”¹⁵ Such combinations, as emphasized by James Elkins, characterize not only fine art images, but also “informational imagery.”¹⁶ One example provided by James Elkins is a sonar chart which, according to him, is a composite of very different routes of reference. Namely, it is a composite of a notational route (as an x-y graph), a naturalistic route (as a naturalistic landscape), and a symbolic route (as a collection of symbols for the motion of fish).¹⁷ Applying this to financial charts, it can be said that they can also be composites of very different routes, such as notational, symbolic and naturalistic (see Figure 5). The latter, that is, the naturalistic route, allows them to be seen as figures, such as those mentioned above: a mountain peak, a speeding car, etc. Such a mode of seeing comes from certain inherent features of financial charts as well as from the technologization of capital markets. For instance, seeing a financial chart as an overflowing river results from the fact that financial charts, as graphs in general do, dramatize their data by linking discrete events in time to produce an impression of temporal continuity.¹⁸ In turn, the mediation of financial exchange on capital markets by information and communication technologies contributes to the vision of a financial chart as an overflowing river, in that it enhances the abovementioned impression and the financial chart starts to appear as something that is in constant motion.¹⁹ Additionally, by recording all transactions that take place on a given market, as well as the slightest change in the prices of financial instruments, information and communication technologies, such as the stock ticker, make the motion of a financial chart line more intensive, generating the impression of something dynamic; something that looks like an overflowing river. Thus, it can be said that it is this dramatization through the financial chart and the technologization of financial markets that allows investors to set in motion such pictorial meanings, that is, to see in them abstract lines, shapes and figures, mountain peaks, overflowing rivers, and so on.

Thirdly, it is investors’ language that turns abstract chart lines into mountain peaks, speeding cars, lurking animals, overflowing rivers and smiling models.²⁰ To put it differently, it is investors’ language that defuses the abstractness of financial charts, making them replete with different meanings and causing investors see in them the mountain peak, the speeding car and so on. This effect of the investors’ language results first and foremost from the fact that it is full of various metaphors.²¹ Importantly, these metaphors are something more than just poetic expressions that perform an ornamental and eloquent function. Namely, they also put something before the eyes of their audience or make their hearers see things,²² that is, they perform a picturing function through the work of resemblance.²³ What is more, this picturing function is so important because the metaphors put images before financial agents’ eyes, which allows them to see that which is immaterial and abstract (the capital market) as something concrete material, and clearly delineated (e.g. as a speeding car).²⁴ Thus, it can be said that it is the omnipresence of metaphors in investors’ language that makes it possible to see in financial charts not only abstract lines, shapes or figures, but also certain concrete entities such as rivers, animals, cars or models.²⁵

The Financial Chart as a Performative Agent

The idea that financial charts are something more than just useful tools does not exhaust itself in the argument that they are expressive visual objects. To this should also be added that financial charts are performative agents as well. I borrow the expression “performative” or “performativity” from the theory of economic and financial performativity.²⁶ Within this theory, the performativity of economics or finance is generally understood as the idea that economic reality or the world of finance is not something that is observed, described and reflected by economic and financial theories and models, but rather something that is created, shaped, brought to life, enacted, established, in short, performed, by these theories and models.²⁷ Donald MacKenzie, specifying the above idea, distinguishes the following versions of performativity: generic performativity, effective performativity, Barnesian performativity and counterperformativity.²⁸ Generic performativity refers to the situation when an aspect of economics (a theory, model, concept, procedure, data set, etc.) is used by participants in economic processes, regulators, etc.²⁹ Effective performativity takes place when the practical use of an aspect of economics has an effect on economic processes.³⁰ Barnesian performativity means that the practical use of an aspect of economics makes economic processes more like their depiction by economics.³¹ In turn, counterperformativity means that the practical use of an aspect of economics makes economic processes less like their depiction by economics.³² In this article I follow these various meanings of performativity as well as other meanings of the term.³³

Thus, starting from the general understanding of performativity, it can be said that financial charts are not neutral and passive records of financial exchange that takes place on capital markets, but rather active actors that shape it. Namely, they shape it through their impact on investment decisions and choices of investors, especially those called “technical analysts.” Technical analysts, one of the main groups of economic actors on capital markets, are investors that are generally not interested in macroeconomic data, financial reports and the activity of the company. All that they require is a price history in the form of a graph.³⁴ Thus, it is first and foremost the financial chart that shapes their investment decisions and choices, causing them to buy, sell or hold financial instruments (see Figure 6).

However, financial charts not only manifest their performative power by being the main investment tool for many investors (technical analysts),³⁵ but also in a more discrete way. Namely, they do so by means of a graphic line connecting the previous prices of financial instruments with current ones, giving rise to the feeling that there is continuity between them, that there is a link between the stock prices on one day and those on the next day. As a result, investors start to use the current prices of stocks as indicators for their predictions of the future and, consequently, place too much importance on them, revealing what is called “end-anchoring bias.”³⁶ Importantly, this bias has an impact not only on the behavior of investors, but also on their financial performance, meaning negative consequences for their investment portfolio.³⁷

In the context of this kind of performative power of financial charts, a very interesting question arises., Bearing in mind that these charts are the main tool for a large group of investors (technical analysts) and, as such, they induce a certain type of bias in the perception, thinking and behavior of financial agents, one may ask to what extent is that which is happening on capital markets—including increases, decreases and pricing of financial instruments—the result of the influence of economic factors, and to what extent is it the operation of the financial charts themselves. In other words, it may be asked whether what is happening to these markets is a derivative of economic processes, the impact of which is reflected in the financial chart, or is it primarily the financial chart, or broadly, that which is visual, that shapes what it has supposed to reflect. Without providing an unequivocal answer to this question,³⁸ I would like to emphasize that in the practice of investing on financial markets, one can encounter situations in which only breaking a certain line on the chart by quotations causes ups or downs that then stop at one of the price levels determined by Fibonacci retracements (see Figure 7).³⁹ Thus, even if everything that happens in the stock market is not just the effect of the financial chart, there are nonetheless instances when it is so; when it is the financial chart that shapes the economic facts of buying, selling, or holding stocks.⁴⁰

But the abovementioned work of financial charts is only one side of their performativity, because the performative power of the discussed charts goes far beyond just shaping financial exchange on capital markets; beyond just creating financial facts in the form of buying, selling or holding stocks. It also affects the very functioning and existence of these markets. In other words, financial charts contribute to the constitution of financial markets—to the possibility of their functioning and existence—and they do this in at least three ways. Firstly, contemporary capital markets are something formless and intangible “made up of trillions of pieces of information about trading transactions the world over.”⁴¹ Thus, to become a concrete worldly thing that can be perceived at all, they require a process of “representational mapping.”⁴² Financial charts contribute to this process, reducing the trillions of pieces of information to several abstract lines, shapes and figures. In short, and following John Law and John Whittaker’s analysis of the function of charts and graphs in representing scientific data in the popular press,⁴³ financial charts take complex and often thorny information and homogenize it, thus making it presentable.⁴⁴ Such work is so important that thanks to it, that which was invisible gains “material form.”⁴⁵ In other words, it becomes sensible, analyzable, measurable, examinable, manipulable and intelligible.⁴⁶ Thus it can be said that financial charts that make financial markets visible, at the same time make them manipulable, manageable and workable.

Secondly, contemporary financial exchange on capital markets brings together a huge number of unrelated subjects that are dispersed across different places. How is it possible—one may ask—that these unrelated actors, distributed over a large territory, embedded in different contexts, and with different upbringings, engage in similar activities whose outcomes are so uncertain? Furthermore, how can this engagement arise and be maintained over time?⁴⁷ In answer to this question, Alex Preda points to integrative practices that make and maintain the aforementioned engagement. According to Preda, these integrative practices consist of a specific combination of mutually reinforcing representation modes, legitimating discourses, and cognitive instruments.⁴⁸ Among the latter are financial charts. Their integrative role consists in making financial securities and the market itself independent of the people who exchange them and independent of the place where this exchange takes place. They do this by the transformation of the market and its components into abstract lines, figures, shapes and numbers on the financial chart. Thanks to this transformation the market can move between different places and contexts and, importantly, under the same unchanged form, ceasing to be limited to a single marketplace. As such, financial charts are an example of what Bruno Latour calls “immutable mobiles,”⁴⁹ that is, “cognitive instruments for transporting complex social entities across various contexts.”⁵⁰ Thus, financial charts contribute performatively to the very functioning and existence of capital markets in ways that make investment possible as a widespread activity and, as a result, also make possible the existence of the market as an integrated homogeneous network, one not limited to a single marketplace, but extending itself across heterogeneous events.⁵¹

Thirdly, financial charts not only make the market the concrete worldly thing it is, that can be perceived and, consequently, subjected to an action, but by doing so they also allow the market to be seen as a single entity with its own dynamics and history;⁵² as a coherent sphere that has its own laws and regularities and its own inner life cycle.⁵³ Such an image carries with it two important consequences—it “gives back to observers a reassuring perception of the rationality and the wholeness of the economic order they are confronting.”⁵⁴ As a result, investors start to believe that the market can be captured, understood and predicted (seeing that it is rational and ordered by its own laws and regularities). This, in turn, is not without impact on the propensity of financial agents to participate in the financial exchange on capital markets. Put differently, it is difficult to imagine that people would be so willing to participate in capital markets without the impression that the market is understandable and predictable; the impression which is induced by the aforementioned image of the financial market.⁵⁵ Moreover, the image of the capital market as a coherent sphere with its own laws, regularities and inner life cycle, generated by financial charts, not only has psychological consequences in the form of perceiving the market as understandable and predictable (which in turn can affect investors’ propensity to engage in financial exchange), but also has social and political consequences. In particular, such a perception gives the impression that capital markets and investment in financial securities are quite different from casinos and gambling—whereas the latter is governed only by chance, it is suggested the former is guided by inherent laws and regularities. This is an important difference which, when established, morally and socially legitimizes financial investing and markets.⁵⁶As such, financial charts contribute to the moral legitimization of capital markets through helping to differentiate between gambling and financial market practices, and by imputing the image of the market as a coherent sphere with its own laws and dynamics.⁵⁷

Conclusion

Financial charts are one of the most widely used investment tools on capital markets. However, they are not only useful tools that, due to characteristics such as readability, scalability, combinability, immutability and mobility, have accompanied speculative financial practices since the mid-1830s,⁵⁸ but also expressive visual objects and performative agents. As expressive visual objects they are seen not only in one, informational way, that is, as a source of financial information and instruction, but also in other more complex ways, or to paraphrase Nelson Goodman, through different routes of reference. To put it another way, they are seen not only as a notation, but also as an image in a deeper sense. This means that investors not only see buying or selling signals in the abstract shapes, lines and figures of a financial chart, but also such things as mountain peaks, speeding cars, lurking animals, or overflowing rivers. In turn, as performative agents, financial charts are not just a “dead instrument”⁵⁹ that passively records financial exchanges taking place on capital markets, but rather living beings with desires of their own, forms of life that “speak to us and look back to us.”⁶⁰

Such a view of financial charts runs counter to what Rob Aitken calls the growing abstraction of finance and financial markets, through which they have been separated from the social, cultural and political context in general and gambling and games of chance in particular, and through which they have gained their moral and social legitimacy.⁶¹ It does so because it shows that one of the most popular and common investment tools used by investors, i.e. financial graphs, are not only abstract, dry notations, but also expressive visual objects that have affective, cultural and historical dimensions. Moreover, it does so by showing that financial charts, transforming the market and its components into abstract lines, figures, shapes and numbers in a visual display, contribute performatively to the very process of financial abstraction, and consequently to the separation of finance from gambling and to its moral legitimization. Without financial charts, or from a broader perspective, that which is visual, this kind of separation and legitimacy would certainly be more difficult.⁶²