In this lesson we will cover basic chart reading. We’re going to look at candles, then we’re going to compare those candles to bars. We’re going to review some basic candlestick patterns, then chart patterns from traditional technical analysis. At the end of the lesson you’ll have a way of looking at chart patterns that focuses on market structure.
From Data to Charts
Market data is a (more or less) continuous flow of price data.
- Prints (trades)
Humans have limited ability to process this raw data.
So many traders use charts as a way to read market data.
Can give good insight into market direction (trends).
Can give some heuristic assessment of volatility.
Some patterns may have a statistical edge that could offer opportunities for profits.
Reading Candlesticks Factors to Consider
Size of body
Size of shadows in relation to the body
Position of open and close within day’s range
Relation of candlestick to overall trend
Candles vs. Bars
Classical Chart Patterns:
Head and Shoulders
The Building Blocks of Market Structure
- Pivot high: bar with a lower high before and after.
- Pivot low: bar with higher low before and after.
- Indicates short-term exhaustion of buying and selling pressure.
- Are important levels to watch for potential support and resistance.
What Is The Structure?
Pivots Outline Structure
Bars and Candles
- In context
- Swings and pivots
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