PRINCIPLES OF TRADING: CHARTING
Where can you see market movements? Charts. Thanks to technology, traders can view as many market information as they can in one go. But not all charts are helpful. So it is important to only use the ones that improve your trades. If there’s one tool that can greatly influence the way you do trading and perceive the market, it’s charts.
Any aspiring trader should learn how to search and interpret market data as quick as possible. That way you can swiftly respond to changing conditions and unlock trading opportunities.
This tutorial will discuss the three important components of a chart: color, layout, and numbers and text.
Color. Picking colors which are easy to view is imperative. Good thing majority of charting platforms offer tons of color choices. Color matters a lot especially in actual trading and research. There are two primary criteria when selecting the combination of colors: readable and visually pleasing.
It is advised to keep chart backgrounds to neutral colors (black, white, and grey). Other colors may work but for a short period of time only. One can also try different combinations for the remaining portion of the chart such as grid lines and texts.
When it comes to bars and indicators, the color should stand out from the background since you are trailing market movements. Most traders choose green or white for up bars and red or black for down bars. Indicators should be much different to interpret charts easily.
You may opt to use one color scheme for the order entry chart and another for the rest of the charts. Whatever your preference is, remember this: dark over light and light over dark.
Figures and Texts. Make the numbers and texts on your charts readable by using bold, clean fonts. You may use a larger font size for vital details and a smaller one for insignificant information. For prices on your chart’s price axis, size it suitably.
Upon deciding on the font type and size on your chart, it is advisable to use the same setting on all your other charts to make it comprehensible.
Layout. If you have more than one monitor, better. Some traders, however, prefer using one monitor to scan all the necessary details. For better viewing, remove all unnecessary or redundant market data or tools from the chart.
Overlays are placed over the price bars, while sub-charts are put below the price chart. Technical indicators can be drawn either as a sub-chart or as an overlay. If using the same indicator on several charts, it is better to put them in one location.
Forget not to save the charts or you will set them up again. This process is time-consuming; hence, it is best to save everything either by using the platform’s Save as Picture function or taking a screenshot.
Up next, leverage and margin.
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