Charts Reading - X-ray of Trading
Charts reading is core heart of Futures Trading, Charts reading explains fundamental and technical analysis easily. All market price moving are plotted into charts for better understanding. There are typically three types of chart reading
1. Line chart
2. Bar chart
3. Candlestick chart
A simple line chart draws a line from one closing price to the next closing price. When strung together with a line, we can see the general price movement of a item over a period of time.
A bar chart also shows closing prices, while simultaneously showing opening prices, as well as the highs and lows. The bottom of the vertical bar indicates the lowest traded price for that time period, while the top of the bar indicates the highest price paid. So, the vertical bar indicates the item pair’s trading range as a whole. The horizontal hash on the left side of the bar is the opening price, and the right-side horizontal hash is the closing price.
Bar charts are also called “OHLC” charts, because they indicate the Open, the High, the Low, and the Close for that particular item. Here’s an example of a price bar:
Open: The little horizontal line on the left is the opening price
High: The top of the vertical line defines the highest price of the time period
Low: The bottom of the vertical line defines the lowest price of the time period
Close: The little horizontal line on the right is the closing price
It show the same information as a bar chart, but in a prettier, graphic format. Candlestick bars still indicate the high-to-low range with a vertical line. However, in candlestick charting, the larger block in the middle indicates the range between the opening and closing prices. Traditionally, if the block in the middle is filled or colored in, then the trading closed lower than it opened.
What is Candlestick Trading?
Back in the day when Godzilla was still a cute little lizard, the Japanese created their own old school version of technical analysis to trade rice. A westerner by the name of Steve Nison “discovered” this secret technique on how to read charts from a fellow Japanese broker and Japanese candlesticks lived happily ever after. Steve researched, studied, lived, breathed, ate candlesticks, began writing about it and slowly grew in popularity in 90s. To make a long story short, without Steve Nison, candle charts might have remained a buried secret. Steve Nison is Mr. Candlestick.