Combine line charts and candlesticks
Hey traders, no doubt you will realize what you can see in a chart is very important to what you intend to trade. Here is a simple tip to put together the best features of a simple line chart and a candlestick chart.
Best features of candlesticks
- Candlesticks are colour coded so market sentiment are easily visible even at a glance.
- Strength of market sentiment in each trading session is highly visible in the way candlesticks are defined. Long candles tell story of decisive movement while short candles paint a picture of sideway range or what I call ‘not rocking the boat’.
- Candles that have long tails speak of volatility during the session but more importantly tails are created when the market goes one way and then reverses to the other. It is a picture of struggle i.e. intra-session reversals
- Shapes and size of candlesticks say a lot about mood at key supports and resistances.
The downside of candlesticks is that users find that there is too much ‘noise’.
Best features of line charts
- Line charts remove the volatility of candlesticks by focusing on the price only instead of the whole array of ‘Open’, ‘High’, ‘Low’ and ‘Close’.
- They are superb for recognising chart patterns.
Users find that while line charts are great at showing big patterns, too much information is given up. If the closing price of 2 or more adjacent sessions are nearly unchanged, it would be impossible to tell anything about the nature of action during those sessions.
Simple way to overlay line chart on candlesticks
- One a candlesticks chart, you can insert a one-period simple moving average.
- To make it stand out, the colours of the candlestick can be personalised or lightened if necessary.
- Choose a dark coloured moving average line that is thick.
- Some users who still can see the one-period ‘line’ very well can apply a ‘shift’ of 1 i.e move the line one-period to the right.
You will find that now you can see the line chart and the candlestick chart all in one desktop without having to switch between 2 modes.
Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.
“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.