What should you study before you start trading?

c, How can we Read Charts for Trading?

Let’s understand the different types of charts used for trading.

1. Bar Chart

2. Line Chart

3. Candlestick Chart

The most popular and widely used chart is the candlestick chart. Candlestick charts and bar charts  show – open, high, low and close prices, whereas line charts show only the close price. 

⇒To understand the structure of the market at a glance, the line chart can act as a great tool. To go further and identify the market trend or check whether the market is moving sideways or within a range, the line chart will be your  greatest asset.

⇒To understand the volatility or indecisive character of the market we use bar charts or candlestick charts. The candlestick chart is  the more popular choice.

⇒To understand the support and resistance of the market we can use a line chart for more clarity.   Keep in mind the candlestick chart is to be avoided by a beginner as it will cause confusion with its tail and wing or in other words – lows and highs.

Reading a chart means to understand the market structure, trend, range or support and resistance. In order to read a chart, the time frame of the chart should be taken into consideration.

We can increase the accuracy of chart reading by analysing the particular chart in different time frames. For intraday trading consider a 5 or 15 minutes chart, for short term trading use a day chart and for long term trading use a weekly or monthly chart.

In short, to read or understand the chart, always follow the thumb rule – higher time frames to smaller time frames. Even if you consider intraday trading, start reading from the weekly chart, then move on to the day chart and finally to the 15 minutes chart so that you can trade in 5 minutes or 1 minute charts.