Charting Tools and Interpretation

Traders rely on charts. They study and analyze charts not only to spot price trends, but also to decide when to enter or exit a position. This is the key to trading. It is not enough to identify a stock that you like, or that you believe is going to move in the direction you desire. You also need to determine precisely when to enter a position and when to exit.

This is no small matter. It takes considerable study and analysis to develop a sense of the many timing signals that you need and will use to improve the timing of trades.
These set-up signals can include a short-term trend as it begins or ends, volume levels, traditional technical signs like gaps and breakouts from the established trading range, and specific price patterns you find on charts.

Key Point

Entry and exit timing signals are numerous and not always easy to spot. It requires experience and practice to fine-tune the skill traders rely upon to time their trading decisions.

Technical indicators are keys to improving your chart-based analysis. The premise of this range of tools rests with the trading range and well-defined levels of support and resistance. More specifically, conclusions are reached by how price acts and tests these trading range borders. The technical indicators based on the theory of trading range patterns are collectively called Western technical indicators and are based on interpretations traditionally performed through the development of charts over a period of days, weeks, and months. They focus on price and volume changes and developing levels of momentum. Charting Tools and Interpretation is focused specifically on various kinds of charts that you will use to study price patterns and improve your timing.

Before the widespread use of the Internet and easy access to free and instantaneous online charting, traders had to build their own charts by plotting prices each day and hoping to identify opportunities to enter positions or changing trends to generate well-timed exits. By today's standards, these old-style methods are quite primitive. Today, traders are more likely to use Eastern technical indicators. This is a method of analysis and timing based on the study of candlestick charting.

Candlestick Charts: The Basics explains various types of charts and then focuses on how candlesticks, also called Japanese candlesticks, are used effectively not only to improve what charts reveal, but provide extremely valuable patterns in single sessions, double sessions, and triple sessions that reveal likely price direction about to occur.
By Michael C. Thomsett
Michael Thomsett is a British-born American author who has written over 75 books covering investing, business and real estate topics.

Copyrighted 2020. Content published with author's permission.

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