Monday, May 14, 2012

Charting Types


MetaStock SPRS Series - Week 68 - TechniTrader® Stock Discussion for MetaStock Users - Charting Types - May 14, 2012
By: Martha Stokes C.M.T.

During my last webinar I talked briefly about the wide variety of chart types that are available to the MetaStock user.

Why are there so many different charting types available for trading?

Charting has evolved as the financial markets evolve. Some trading instruments require a different type of chart for more accurate analysis of the market data.

Some charts assist traders who have visual impairments or visual restrictions such as pattern identification challenges.

Some charts are pure price, some include price and time, and some include price, time, and volume combined in the price chart.

Each is useful for specific purposes.

Let’s examine these further so that you understand all of the types of charting available to you and how you decide which is right for you.

The most popular charting type at this time is Candlestick Charts. Candlestick Charts are easy for most people to read, give quick pattern identification and also give good support and resistance patterns.

Candlesticks also provide entry and exit signals when used properly. Although the Japanese used candlesticks mostly for reversal and continuation patterns, the candlestick patterns that form in the western automated marketplace also can be used for specific targeted entries and precise exits.

The ability to use price in the form of candles for entries and exits is a huge reason why Candlestick Charts are so popular and reliable for short term trading.


Chart 1

Equivolume is a chart type that depicts volume within the price over time. This chart type looks very similar to Candlestick Charts except that the up and down days are not white and black. There are also no wicks or tails, that are extensions beyond the body of the rectangle that define the highs and lows for the day, as there are in Candlestick Charts.

In Equivolume, only the open and close are identified. The size of the candle designates the volume for that day.


Chart 2

By showing the relationship between the length of price action and the dimensions of the rectangle for volume, a clarity is revealed with regards to the huge volume days. Whenever trading requires emphasis on volume for better analysis, Equivolume has advantages over simple Candlestick Charts.

The negatives for Equivolume are the lack of the high and low for each day, and the difficulty in using this chart type for price-based entries and exits.


Chart 3

The Candlevolume Chart combines Candlestick Charts in its pure form with the Equivolume. This chart type provides the distinction of white candles for up days and black candles for down days, where Equivolume does not, and it also has the wicks and tails of Candlestick Charts to show the entire scope of price action in each candle.

The problem with Candlevolume is that it distorts the candlesticks and, therefore, may make it more difficult for traders to interpret price action for candlestick entry and exit signals.

Adding Equivolume or Candlevolume charts shows you whether a down day or up day had high volume and provides a better significance to the price and volume relationship.

The combination of Candlestick Charts with Equivolume or Candlevolume can help traders who struggle to see volume in the bar or line form. It also helps traders see when volume is leading price and when price is leading volume.

As you develop your own unique trading platform using all of the wonderful tools available in MetaStock and take the time to experiment with the various charting types that MetaStock features.

MetaStock has more chart types than any other charting program.

To learn more about the various chart types, visit http://learncharts.com sponsored by TechniTrader.com.

All of the charts in learncharts.com are from MetaStock Charting Software.

Trade wisely,

Martha Stokes, C.M.T.
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
http://technitrader.com
MetaStock Partner

©2012 Decisions Unlimited, Inc.

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