Chart Layout

In order to start trading, you must know the importance of accuracy. Understanding the markets in multiple ways give you more confirmation. Having multiple confirmations and being accurate is key to placing trades to profit. You may look at the markets in different chart layouts, there are different chart layouts to look at them, but we are going to focus on the main ones we prefer to use to keep it simple and direct.

LINE CHART

Line Chart

The line chart represents the market’s change of price using a continuous line from one closing price to the next closing price. This type of chart shows a reduced noise from the less important times in the day. It is important for us to use this because it shows the market’s closing prices over time. The opening highs and lows are less relevant in this chart.

The simplicity of using this chart exposes the levels where price was either rejected or broke-through and retested. This enables us to place accurate support and resistances, to look for key levels and patterns. Traders may also use this chart to mark up without dealing with the fluctuation of the market.

Not all trading strategies may work on this particular chart because this may not provide enough information such as candlestick patterns, which contains open, close, high and low prices that may be more useful than using a line chart. However, this is optimal for beginning traders because it is simple to use. It can be overwhelming when analyzing a chart with too much information but this generalizes the movement of the market.

“I use this chart to place my major support and resistances, by simply looking for retests and reversals. I tend to start looking at the line chart first before going to candlestick chart and look at the overall view of the market, from the beginning to current. If you pay attention to the highlighted areas, these are what I look for when I place my price levels.”
– Gian Gonzaga

If you noticed, some of the price levels that is highlighted either does not touch, overlaps, or sits right on a support or resistance level. Using the line chart, look for areas where price “touch”, “gap”, or “overlap”.

Once you find the areas, you will place a horizontal line between them to represent the support/resistance. You may place as many as you want to practice, but ideally you just want to put them where the market is close. This generally works on any timeframe, but is preferred on larger timeframes. You will learn about this more as we go deeper in this course.

Key Notes:
– Line chart is a great chart layout for starting traders to begin with. This shows one closing price to the next price.
– You can use this chart to look for retest and reversals to place your support and resistances.
– Place your key level or support and resistance where price touches, gaps, or overlaps.

CANDLESTICK CHART

Candlestick Chart

This candlestick chart represents the market’s change of price showing open, high, low and close (OHLC) of each candle. Candlesticks shows the highest point to lowest of fluctuation. This is the most favorable chart to trade with as professional traders anticipate fluctuations to hit a certain price and enter a trade with very minimal to zero drawdown. To understand a candlestick chart, you have to understand candlesticks and the basics of it.

Each candle represents time of specific timeframe. If you are looking at the candlestick chart on a weekly timeframe, each candle represents 7 days. If you are looking at the candlestick chart on a daily time frame, each candle represents 24 hours.

The basics of a Bull candlestick:
– The Body shows the strong demand of a buy by indicating a push to the up side.
– The Wick shows the market’s highest and lowest price point of the particular candle.
– The Open shows the beginning price at the bottom of the body.
– The Close shows the closing price at the top of the body.

The basics of a Bear candlestick:
– The Body shows the strong demand of a sell by indicating a push to the down side.
– The Wick shows the market’s highest and lowest price point of the particular candle.
– The Open shows the beginning price at the top of the body.
– The Close shows the closing price at the bottom of the body.

(You may change the colors of the candlesticks on your chart if you choose to.)

“I mainly use this layout to look for multiple things. For start, if you pay attention to the highlighted areas, I placed my price levels based on the market’s previous movements such as wicks, retests and reversals. The more wicks, retest and reversals I saw in one specific level, the more significant it is, especially on larger timeframes.”
– Gian Gonzaga

This helps us visualize the markets movement exposing certain price levels to get hit, identifying the market’s turning points or exhaustion and marking up patterns. Majority of traders incorporate candlesticks with the candlestick layout to mark up market patterns. You will learn more about this later as we go deeper in this course.

Key Notes:
– Candlestick chart shows opening, highs, lows and closing prices.
– Each candle represents time of a specific timeframe. For example, If you are looking at the candlestick chart on a weekly timeframe, each candle represent 7 days.
– Candlestick chart helps us understand the market’s turning points or exhaustion and used to mark up patterns.