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Setting Up Your Chart on Your Platform

 January 13, 2021

SETTING UP YOUR CHART ON YOUR PLATFORM 

Fellow traders and investors I know you have heard of the concept of charting. But if you haven’t…where have you been my friend. LOL. I consider myself a technical trader/investor meaning I put focus on how to read a stock chart over the fundamentals of a company. I am not saying that fundamentals are not important, but rather the trades I prefer to make are short enough to where the long-term fundamental factors are less important. Recent information presented by the Come Up Series on YouTube has enhanced my understanding of how to put the fundamentals, technical, and options together for some incredible potential returns. 

 

So in this quick blog I will share my insight on how to set up your charts.  

1.   SETTING UP TIMEFRAMES

The number one thing you need to do is set up your timeframes for your chart. The most popular is the Daily (each candle represents a day) chart over a 1 year timeframe. Of course, you can set up the timeframe to be over the course of 2 years, 5 years, etc. The next most popular set up is a weekly (each candle represents a  week) chart over a 2-5 year timeframe. At this point you understand that you can set up the timeframe to your desires. But a daily chart and weekly chart gives a normal view of the market/stock and then a macro view of the market/stock. 

Now for those who want to have a more micro view of the market/stock you can set up charts as a 1 hour, or 30 minute, or 15 minute, or 5 minute, or even 1 minute. These are considered “intraday” charts. The timeframe you would set up is generally over 5 days. These chart set ups are popular among day traders and even swing traders. Allowing for a closer look at the stock in order to pinpoint a specific buy or sell signal

2.   VOLUME & AVERAGE VOLUME

Volume is a key to understanding the momentum of a stock. When there is increased volume on a stock  and you have a big green candlestick that could indication bullish momentum and the stock price increasing over time. Conversely this could mean the same thing for red candles on a bearish move. When you add the average volume you also get an idea of the liquidity of the stock. Stocks with higher volume and higher averages are more liquid and trade frequently so getting in and out of a position may be easier. 

For example is Apple (AAPL) has an average volume is roughly 106 million vs. a company like Proctor & Gamble (PG) that has an average volume of 6 million. Obviously Apple is a widely more popular stock therefore more people are trading it, so that means if you wanted to exit your position then it would be relatively easier to find a buy. As a trader you want to find liquid stocks so having the volume bars on your chart is important for you to be able to pick the right type of stocks to trade. 

3.   SECONDARY INDICATORS: MOVING AVERAGES (SIMPLE & EXPONENTIAL), BOLLINGER BANDS, RELATIVE STRENGTH INDEX (RSI), AND MUCH MORE

Lastly let’s consider some secondary indicators. These indicators are secondary because they derive their values after the movement of the stock price. Therefore stock price is a primary indicator…if you didn’t have the ability to put indicators on your chart you can still be successful in trading based simply off what you see in the price. 

Moving Averages (Simple & Exponential): this is one of the most used and popular indicators on a chart. They are either referred to as SMA (Simple Moving Average – a “basic” average of the previous stock price over a predetermined period) or EMA (Exponential Moving Average – a “faster” average of the previous stock price over a predetermined period). I recommend watching additional videos on what makes up the  moving averages so you can determine how you can use it. The popular periods to set up for the moving averages are the 20 day, 50 day, 100 day. Traders and investors use these averages to help determine trends, support or resistance and a bunch of different factors in picking their buy/sell signals. 



Bollinger Bands: This indicator is a popular one amongst long-term investors/traders. It consist of two lines that sandwich the stock price and a line that runs as a 20 period moving average. The outside lines are based on a two standard deviation calculation determined by the charting platform. Standard deviation being the 2x the average stock movement up or down over a particular period of time. Generally when the stock runs on the top line of the band it is moving away from its average and could be a sign of a pullback (sell signal) soon to occur. At the same token when it is riding the bottom line of the band the stock is lower than its average and could soon pull up (buy signal) and get back into its normal range. Again, I suggest watching additional videos on how you can use the bands for your trading. 



Relative Strength Index (RSI): the last indicator I’ll cover is the RSI. This indicator helps measure whether a stock could be oversold or overbought. The RSI has a finite width that the stock can measure on the indicator from 0-100. With a oversold area around the 30 line and an overbought area around the 70 line. When the line crosses these thresholds in conjunction with where the price action on the chart is then it could indicator where you would buy or sell. Again, I suggest watching additional videos on how you can use the RSI for your trading. 


So ladies and gentlemen that’s it for this blog. Just wanted to touch on a few chart settings that are key to your success in trading and as an investor. Please understand this is only the tippidy tip of the iceberg when it comes to chart settings. There are sooooooo many options available on your trading platform and as you continue your trading/investing journey you will change your settings multiple times as I have over during my journey. It’s all about preference and what your eyes can digest on the screen…some people can have a lot of indicators and some people like a less is more view. 

I took the liberty of making 30 minute video on YouTube on how my chart is set up and some cool features I like on my ThinkorSwim platform. https://youtu.be/KDtYbT9mMuc When you have a chance please take a look…if you enjoy hit the like button…and subscribe if you want to be notified of future videos. 

Appreciate you for taking the time to read this blog. 

Think, Live, & Be Unstoppable!

The Emotional Trader

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