Traders that understand how to read and interpret their charts have an unfair and distinct advantage over most people trading the market today. Many traders think they know how to interpret their charts, yet they continue to fail in their trading.
What follow are 4 tips that will improve the way we look at charts:
Is all about the Waves
The market moves in waves. While everybody always talks about trends and riding the trend to maximum profits. The truth is that no trend shoots straight up without retracing on the way up. Think of it as taking four steps forward and two steps back. You will see this type of movement even in the strongest of trends. People make profits and people take profits along the way as the trend continues to go up or down. A lot of traders leave of the profit on the table because get out of a trade too soon, not realizing that trends is still going strong and what they are seeing is a retracement. Ranges also develop in waves. To that end, the interpretation of ranges and trends in your chart is critical. When trading, always keep in mind that trend will move up/down, pullback a little, and then continue the trend to pullback again and so forth and so on.