How To Use Charting Platforms For Trading?

Introduction

When it comes to stock markets, there are multiple types of analysis traders and investors indulge themselves in. But, two mainstream ones are Fundamental Analysis and Technical Analysis. The former is done by analysing the financial performance and future scope of a company, whereas the latter is a study of historical prices by plotting a chart of a share to understand its trend and predict future trajectory. Currently, TradingView and Chart IQ are one of the most used charting platforms in India.

Traders who hold stocks in their portfolio ranging from a day to a few weeks generally do it based on their technical analysis. But before you start reading charts on your online trading platform we need to know what exactly is Technical Analysis and what to look out for while using a charting platform? Let’s try to find that out.

Types of Charts And Timeframe

As the buzz around the stock market is growing, the amount of trading platforms available in the market is also increasing. Almost all of these trading platforms provide or support price charts. But there are multiple types of charts and every chart can be viewed in an “n” number of timeframes. 

The most prominent types of charts are line charts, area charts, and candlestick charts. While line charts and area charts are usually used to get a quick glance at a simpler way to understand historical performance, a candlestick is usually used for performing technical analysis. Unlike a line or area chart, which only represents the closing price, a candlestick chart also depicts the high, low, open, and closing price for the specified timeframe.

Since everyone has a different trading strategy based on their goals and risk appetite, there are charts available in all timeframes, ranging from a minute to a month. Almost all the trading and charting platforms support a variety of timeframes, with hourly, daily, and weekly being the most commonly used ones. 

What To Look Out For In A Chart?

No two traders are alike, and hence they all have different styles of trading which are unique to them. Even though there is no prescribed method for what to look for in a chart, there is one common thing that unites the majority of the styles. Technical analysis ultimately boils down to finding the correct trend, and hence, the trend is what one needs to watch out for while using a charting platform. When it comes to the stock market, “The Trend Is Your Friend,” as the old adage goes. Traders generally couple their trend analysis with volume analysis (the number of times a share has been traded), as higher volumes generally denote a stronger trend than a trend with lower volumes.

Usage of Indicators and Oscillators

Almost all the trading and charting platforms are equipped with an array of indicators and oscillators. These indicators and oscillators like simple or exponential moving averages, Relative Strength Index (RSI), or Moving Average Convergence/Divergence (MACD) help traders identify the correct trend and gauge its strength to help predict if the current trend will sustain or not.

Conclusion

Technical analysis is perceived to be an art in stock markets, and hence only practice can make one perfect or succeed at it. One has to always be mindful that there is no perfect recipe when it comes to analysing charts, and hence every trader or budding trader has to examine and read a lot of charts to find what strategy works best for them using their respective charting platform.