Chapter 5 – What is a Chart?

What is a chart?

  • Bar Chart, Candlestick Chart, Line Chart, Equivolume, Point and Figure and other representations.
    • They use Open, High, Low, Close and Volume as input.

      Three ways price information can be represented - bar, candlestick and line

      Three ways price information can be represented – bar, candlestick and line

  • Bar chart
    • The closing price is displayed on the right side of the bar and the opening price is shown on the left side of the bar.
    • A single bar represents one period of trading (intraday, day, week, etc.)

      Open, High, Low, Close in a bar chart

      Open, High, Low, Close in a bar chart

    • Opening price – reflects Amateurs’ opinion of value.
    • Closing price – reflects action Professional traders.
    • Highest point of each bar – the maximum power of bulls during that bar.
    • Lowest point of each bar – shows the maximum power of bears during that bar.
    • Distance between high and low reveals intensity of conflict between bulls and bears.
Difference between a bar and a candlestick

Difference between a bar and a candlestick

 

Chapter 6 – Longer vs Shorter Timeframe

Timeframe

  • Intraday, daily, weekly, monthly chart
  • Intraday
    • Can be tick, minute, hourly
    • Usually used by traders for day trading or short term positions
  • Daily & Weekly
    • More commonly used in Singapore for position trading/investments
    • 5 daily bars equal 1 bar in weekly chart
  • Timeframe reflects the mindset of investors
    • Weekly chart shows mindset of long-term investors
    • Daily chart shows short-term/mid-term investors
    • Because of the lack of liquidity in some SGX stocks, it may be worthwhile to look at weekly chart
Daily (top) and Weekly Chart of Southern Packaging (T77.SG)

Daily (top) and Weekly Chart of Southern Packaging (T77.SG)

 

Conflicting Timeframe

  • Markets exist in different time simultaneously.
  • May look like a buy on a daily chart, but a sell on a weekly chart. The signals in different timeframes of the same market may contradict one another.
  • Which of them should you follow?
  • When in doubt, step back and examine the charts in a timeframe that is larger than the one you are trying to trade.
    • When professionals are in doubt, they look at the big picture but amateurs focus on the short-term charts.
  • Double screen trading.
Weekly (top) and Daily Chart of Chartered Semiconductor (C27.SG)

Weekly (top) and Daily Chart of Chartered Semiconductor (C27.SG)

 

Special

How to chart with multiple time frame analysis when I trade forex?

 

Practical Technical Analysis (2006) Chapters 1-4Practical Technical Analysis (2006) Chapter 7

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