Why is Charting Important?

For those considering starting a trading home business and you are brand new to trading the first thing you must learn charting and how to read a chart pattern. I am going to say this twice…you cannot hope to be a trader without understanding how to read a chart… you cannot hope to be a trader without understanding how to read a chart! Charts show you the behavior of the markets.

Now don’t get alarmed because charting and reading a chart is relatively easy. The easiest to understand is a bar chart . A bar chart consists of an opening foot, a vertical line, and a closing foot.

The opening represents the first price of an item at the open of the market. The vertical line represents the range of prices of the item during the time frame being observed.

The closing represents the last price of the item at the close of the market. bar chart

Other popular charts include Japanese Candlesticks . Candlesticks represent the same market action as the bar charts but they are shown as a wide vertical line and a narrow vertical line. In my opinion candlesticks are easier to interpret and they have a fascinating history and pattern guide. Understanding candlestick patterns are another topic and beyond the scope of this website, however, I would add the study of candlesticks as a long range homework assignment for a well rounded trader. charting

The whole concept of charting and reading charts is geared towards one objective. You look at a chart to observe patterns that might help you determine what the behavior will be in the future.

Does it work at predicting the future? Some believe it does but we believe it is a fool’s errand. What the charts really do is to help you understand what is going on now in the market.

It helps you determine if the market is trending up or down or whether the market is in a holding pattern and going no where. The whole key to trading successfully is to take advantage of trends (on minute, hourly, daily, or weekly charts) and to minimize your losses by using money management rules.