Technical Analysis Using Simple Charts

[beagle1977365]

I see that a lot of traders, not only here but internationally as well, in stocks and FX tend to clutter their charts with fancy indicators and try to do some fancy analysis based on the indicators and other tools that they can find on their platform.

It is good to try out various things but the basics of trading in any instrument are the price, the volume and the spread (how much the instrument moves for that volume). For doing this analysis, you could probably use certain indicators to help you but what you actually need is a simple and basic chart plus lines to indicate support and resistance plus volume.

Volume in itself is a huge topic which i shall cover later. Lets focus on keeping our charts simple, in this thread, and use as little lines as possible. Even if we use a few lines, it will be those that people understand and not some strange indicator who's basis no one understands.

 

[beagle1977365]

Attached is the daily chart of ITC. Observe that i have even removed the grid lines to make it easy on the eye. Forget about the volume for now. It tells you loads of stories about the stock but that is for later.

I have simply plotted a Fibo from the bottom to the top of the last major move up. That is easy for everyone to see and thats how a Fibo should be plotted. Notice how, after Feb 2017 (when the top was reached and the fibo has been plotted), the prices have always respected the Fibo lines.

We see that on every move down, the price respects the 23.6, 38.2 and 50.0 lines perfectly.

Over the last couple of weeks, you see the price dabble with the 23.6 line. But you also see that the line is not respected perfectly but there is an extension below always. Why?

This extension is due to the gap (marked B) from March 16. The gap indicates that there are many orders sitting in that region waiting to be picked up and that is why when the price comes close to the region, the big traders make sure that they move the price into the gap to pick the idle orders lying within the gap.

 

[mohan.sic]

Are you inspired by reading Wyckoff ....

 

[beagle1977365]

Are you inspired by reading Wyckoff ....

Wyckoff is indeed considered the father of volume spread analysis but truth be told, i have been trading using volume for more than 6 years now. So, its just not something that i read yesterday and talking about it today.

As this thread grows, i will explain how to associate the volume with the movement in price and how it can be used for everyday trading. As i said, what is true is only price, spread and volume. Everything else is just a by-product of these 3 parameters.

 

[beagle1977365]

but the overall purpose of this thread is not just volume analysis but to analyse stocks using as little tools and lines as possible. Lines, indicators etc are nothing but noise on the charts. In the past, traders didnt have 100s of indicators and thousands of lines criss crossing their charts. all these are only recent phenomena which seems to only confuse the trader even more.

If traders in the past could trade successful with not even a proper charting software, it just shows that naked charts are the way to go !

 

[marimuthu13]

OLD WINE IN NEW BOTTLE?/ Just curious .......

 

[traderniftybull]

OLD WINE IN NEW BOTTLE?/ Just curious .......

ha ha
But, nothing new
Many did it previously to get name, fame

 

[marimuthu13]

ha ha
But, nothing new
Many did it previously to get name, fame

no bhai..he is trying to bring new dimensional with respect price, volume, in addition spread...

 

[beagle1977365]

Marimuthu and Tradernifty, since u guys seem to know a lot about wine, maybe you can enlighten us by all your old wine in the old bottle? maybe we can learn something from you?

 

[beagle1977365]

now look at the same charts with our friendly fibo levels added. I have added the fibo extension levels as well. i had plotted the fibo in December and that is why the fibo is from aug 2016 to Nov 2016...but even when the prices exceed the fibo range and go above/below, it is useful for the future also and you can see that in the chart below. you dont need indicators of anything...and these lines will tell u exactly where you take profit and where you should have your stop loss.

each of the extension levels have acted as support/resistance and the final move a few days back took it to the 2.0 level where it has since corrected. isnt this easy?