Intro to Charting and Technical Analysis

Intro to Charts

What are charts?

  • Charts show past and present prices of Markets

Why are Charts so Important?

  • Taking trades without Charts means you are trading off of emotion, third party news / data or suggestions which is risky & could end up burning you in the end.
  • Charts allow us to be able to create our own technical analysis of the market and decide whether there are opportunities to enter the market or to exit the market.

Where can you chart?

  • There are plenty of platforms where you can chart. Many brokers (which we will talk about as well) offer software or platforms to chart on. There are many options available for those that don’t chart within what their broker offers. The most important thing to remember in deciding where to chart is to pick a Charting platform that will be giving you accurate data or data that is as close or identical to your broker’s data. You can easily tell if you are using delayed data on your chart if your pricing for a market is different from your brokers pricing. We suggest charting in TradingView and then taking trades with your preferred broker.

Types of Candles

  • There are a lot of different types of candles.
    • Generally we have the option of Bars, Candles, Hollow Candles, Heikin Ashi, LIne, Are and Baseline.
  • The most popular type of charts are Candles or Heikin Ashi.
  • Note: Regular Candles show actual pricing. Heikin Ashi shows average pricing which means it won’t show actual prices so that your candles are easier to read.
*Show examples*
  • For any examples you see we will be using Tradingview for our TRND Trainer Examples.
  • We suggest using regular candles if you’re a beginner, and only to us Heikin Ashi candles as an additional indicator.

Intro To TA and Charting

Technical Analysis

  • Technical Analysis, paired with your knowledge of the market, news and the basics taught here help you to find trades for yourself.

Back to the Basics

  • Basic Concepts

What is a Candlestick?

  • A candlestick is a type of price chart used in technical analysis that displays the high, low, open, and closing prices of a security for a specific period.
  • (Show this on your chart).
  • How Candlesticks and timeframes. Duration of candles are in conjunction with timeframes.

What is a Wick?

  • A shadow, or a wick, is a line found on a candle in a candlestick chart that is used to indicate where the price of a stock has fluctuated relative to the opening and closing prices. Essentially, these shadows illustrate the highest and lowest prices at which a security has traded over a specific time period.

Trend

Successful trading comes down to identifying Trends so that you can maximize your win probability.
  • Spotting a trend and knowing how to trade it can be pretty easy with the right tools and training. Before we get to any trend identification and trend trading tools and tactics, let’s look at some uptrends, downtrends, and range-bound markets to get a sense of what a trend (or lack-there-of) looks like. Learning to spot a trend may seem overly simplistic, but trends are the key to our trading system and as such, it is important to start by ensuring a strong foundation.

Finding Uptrends

Uptrends are ideal for taking long positions.
AAPL (Apple)
What makes the Apple uptrend so attractive is that after every pullback we saw an equally volatile move to the upside which re-established the prior bullish momentum.
  • In trading we always want to have the odds in our favor. Opening long positions in an uptrend increases the probability of having a successful trade. If a trend increases our odds of getting the direction of our trade right, a trend with greater than average momentum amplifies this.
(Up Trend Image)

Finding Downtrends (to find possible Sell or “Put” trades applicable to Option, Forex and Crypto trading)

  • A trend trader doesn’t just sell when a downtrend is confirmed to avoid losses, they short or place “puts” on those downtrends to enjoy gains on the way down.The long-term downtrend tells us to have a bearish bias over time, the short-term downtrend gives us the green light to take short setups and avoid long setups like the plague until the trend changes.
  • To be a trend trader you must take your ideas about “buying low” or “getting a good price” and throw them out the window. Trading is already a game of statistics, and we want the odds in our favor, not against us! Downtrends are for shorting, not buying the dip.
(DownTrend Image)
  • To determine a range, find a recent swing high and low of significance. The price action between those two points is the ”range”. As long as price stays between those two prices it is considered range-bound and NOT trending.
  • To break out of said range there needs to be a significant deviation above the range high or below the range low. Slight deviations should be ignored unless follow-through is shown.
  • Below is an example of a notoriously range-bound chart, the Volatility Index for the S&P 500 commonly known as the VIX. Although we can zoom in to find short-term trends, this market mostly goes sideways and thus it is something we want to stay away from.
We want to stay out of range-bound markets and only enter after a breakout once a trend has formed.

Identifying Trends

The key to trend trading is identifying trends. In the previous examples it was easy to just glance at past price action and see a trend, but that isn’t the ideal way to find a trend. We need a repeatable and predictable trend identification system.
There are multiple ways to find the direction of the trend. For example, you can use moving averages to calculate the last X units of price over Y time to see if price is up or down within a period. However, we favor mechanics all traders can agree on at a glance. So instead of guessing which moving averages to use, let’s go for a more simple and less subjective method.
One simple and mostly objective way to identify the direction of the trend without any equations or software is by drawing simple trend lines on a chart. To create a trend line, simply connect at least two highs or two lows at the wicks as shown in the image below.
When using a single trendline like we do in an image, If the trendline angle is between 0 to 90 degrees (sloped upwards) then that trendline is increasing and this typically equates to an uptrend. If the trendline angle is between 0 to -90 degrees (sloped downwards) then that trendline is decreasing and this typically equates to a downtrend.