If you’re new to the trading game, and you’re not a Ph.D. in Economics, then charts are the way to go. The most basic charts are bar and line charts. In fact, even if you’re an experienced trader, bar and line charts probably still have a special place in your daily trading life. These charts are simply indispensable.
“A picture speaks a thousand words.” This proverb holds just as true for charts. Charting is the graphical expression of a financial market’s be¬havior over a period in time.
Any market has four different trading points throughout one day. They are: opening price, closing price, absolute high price of the day, and the absolute low price of the day. All of these points appear on trading charts.
The opening price is the first trade of the day. Individual traders tend to place orders when the market opens, in reaction to the previous day’s close. This price will normally be based on emotional decisions and could well indicate how the first half – or the whole day’s trading – is going to pan out.
The closing price is the last trade of the day. It is generally institu¬tional investors that place orders towards the day’s close. Unlike the opening price, the closing price will normally be representative of deci¬sions made by reason and research – not gut feel.
The day’s low and the day’s high are pretty self-explanatory. The difference between the high and low on the charts is referred to as the Range.
The fifth variable displayed on a chart is typically the volume, speci¬fying the number of shares, lots, or contracts traded during the time pe¬riod between the open of the market and the close.
Keep in mind that purely looking at these five points on the charts will not be enough to plan future trades. You need to look at them over a series of time in order to evaluate trends in the market.
Day traders use trading charts to watch the markets and make decisions on when to execute their trades. There are several different types of trading charts, but they all show essentially the same trading information, such as the past and current prices.
Author’s Bio:
Markus Heitkoetter is the CEO of Rockwell Trading, Inc. and the author of “The Complete Guide to Day Trading.” Loaded with easy-to-use information, proven and reliable trading strategies, and clear-cut guidelines to success, the result of this book is a practical hands-on approach to day trading. Check it out at www.thecompleteguidetodaytrading.com. |
Added: Wed May 14, 2008 7:04 am GMT 