Stock Chart Reading


today a quick lesson on Stock Chart Reading Basics This is really for beginners kind of 101 stuff but you know also I have to say that it is also for not only stock charts but Forex futures anything they can chart and sometimes that stuff that even intermediate or advanced traders are forget so it’s a simple lesson but a very very important one so here it is by the way I’ve got the Disney stock here 5-minute chart that’s really not consequential don’t worry about either one of those things I had to put something up some you know some market whether it’s Forex stocks futures some time interval you can do this with daily charts weekly charts to take charts whatever so what I’m going to sure is agnostic with regard to the symbol in with regard to the timeframe it has to do with scaling and this is very important because technical analysis is very visual so you look at a chart like this and it looks like something’s actually happening so you could look at this different ways could put different indicators on here whatever but I’m just looking at price action here so it looks like we’ve got this move down this little move up this move down you know and it looks like okay there’s something actually you know going on here and what its kind of cover these little areas here and it looks like alright there’s something that might be decent to trade there alright now let me show you something and it alone behold fasten your seat belts cuz as I scroll back look what happens huh all of a sudden that range of that market would it look like visually just to the naked eye it doesn’t look so good anymore does it no hasn’t moved very much so now just the visual impression again to the naked eye you know this kind of stuff here is not really that significant this is pretty much just go in sideways pretty much a sideways market so here sure we got a pretty big move down there and then we’ll move up and then all this is really just the sideways from there on so what is it it’s just purely sper spective right so that’s how it looks to the naked eye and it all has to do with how you scale your charts so here’s what I recommend a lot of times and I’ll show you on tradestation now I’m sure I’ll probably get a lot of questions about well how do I do this in this charting software that’s charting software alright I don’t know all the different trading software programs out there not familiar with them all sorry if I knew how I would definitely tell you but unfortunately I don’t so I’ll show you here in TradeStation and then go to the discussion boards or the help desk or support or the forums whatever and learn how to do it on your charting software so again you’ll want to go to scaling the question is how do i scale my charts and so what we have here in TradeStation right now is I have it set to automatic so it is doing the scale range based on the date range on the screen okay so what does that mean by the way well those are a couple other things we’ll come back to those as well so what that means when you choose that setting is that it’s all it’s going to look at the high and the low that’s visible on the chart and it’s going to automatically scale the chart so that the visible high and the visible low stay on the chart and what that will do is change your scaling as time goes on so right now look for example we have 20 cents between each of these markers here right oops actually grabs the wrong thing and when it grabbed there okay so 20 cents between each one of those so as I scale forward see what happens whoa what happened okay now between each marker there is what five cents five cents so you see how it changed the scaling because that type of scaling is going to always keep the low visible and the soy is going to keep the high visible the low and the high that’s visible on the chart and it’s just gonna fill the chart with that they’ll never be any black space at the top never any black space at the bottom and therefore it’s going to chain change the scale and that can be very visually deceiving alright and as we go back here here here see again it’s always filling it up so like for example here this whole range down here okay we see this as pretty much a sideways whip some kind of mist so maybe there alright pretty much a sighs wait sideways move right and that’s because we got this big move up here and again 20 cents between each of the markers on the y-axis now if we scroll back let’s see what happens well okay but see how it’s got the low there and the high there now if I were to actually expand the this is another thing you can do expand there so we just get that there we go that’s our narrow range market that we were looking at that before looked very narrow range just sideways and all of a sudden it looks like oh wait there’s some major swings here that looks like oh that’s a pretty significant swing down that looks like it’s a pretty significant swing up but no again we’re back to five cents between the markers and that’s why so that’s a problem or it can be a problem it can be a problem and for most people I think it actually is because again visually yeah if you can see I’ll just do this boom okay there you go we’re back to narrow range here right now see now and I change this now part of what would part of the price action that would normally be visible it goes off the bottom of the screen and I can’t see it and look there’s black area up here it’s not filling the chart now I can actually pull it up and with tradestation aliyah some trading platforms allow you just to mainly do this so I’m left clicking and I’m holding the left mouse button that’s what I’m doing there just scrolling up and down so I don’t have to actually go into that the setting and others will let you in TradeStation allows this which is cool just again left click in the middle of the chart and move it around like that so those are a couple of different ways you can do it at least on TradeStation but my plane is that you want to have a set scaling right this is the bottom line lesson so you want to set this to whatever now it’s going to depend on the price of the market you know the stocks over $100 so if you’re dealing with a penny stock obviously you’re going to have a sedative friend scale the future is different Forex different whatever so you decide on what scale is meaningful for that market your trading where you’re going to see consolidation is gonna look visually like consolidation and not fill the whole chart from top to bottom and look like something’s actually going on like those real move meant they’re like there’s gonna be a good reward to risk ratio you want to be able to see that oh no this is just choppy sideways consolidating market alright so it’s going to be rate as far as this goes you want to set this to a value that is consistent at all times at all times so every time you look at it your eye will get used to the patterns and not be deceived by the virial variable scaling that would otherwise naturally occur and then as the market goes on yep sure sometimes yeah let’s see I’m sure it’d happen here it goes off the top so what do you do just drag it down that’s it that’s what you got to deal with so you gotta do a little manual work with it now there might be some trading platforms out there maybe even TradeStation and allows it where you can set the scaling here in fact I’ll just go in here and show you this so they have all kinds of other things you can do so you can do automatic change data screen entire date range then you can do a percent above or below so that you get a little black area above and below and then now here’s the other thing if you add your technical analysis technique so let’s say you’re putting on there a 200 period moving average for example there would be a good one so the total period moving average if you want that to show and doesn’t run off the bottom of your chart which you will sometimes then you would click that all right so if I did this and actually here it is already checked pre-checked expand the range to include technical analysis so then a long term moving average it’s going to show that on the chart well that’s going to again skew the price scale the scale of the price and because now it’s going to show moving everything maybe way below the price level but it’s going to move that sure it up to show it so it’s visible on your chart that’s another thing they can really mess you up so if you don’t want that you deselect that of course and then there’s all kinds of other stuff you can do some graph menu she can fix it here’s where you can actually fix it to a minimum maximum now this is for price okay and then here yeah this is the one you can do to movement size so one inch is gonna be five points so if I click on that yeah not so bueno right so good but this is where you can fix it so um if we always say okay and you just got to play around with it a little bit alright so we say well that is too tight so let’s make it point five and let’s see what that looks like okay there we go so now we got something that’s that’s good now that will stay and but now you got to be careful you don’t want to change this watch this extra tips here see as long as they didn’t change that well yeah it’s already got it at at that right now and so now we’re gonna be okay but if you go in here and you change that okay now you’re screwed no you’re messed up again so you’ve got to keep it this same now again I would use different numbers for different time intervals so it’s not just different markets but different time intervals as well so this is what is this again five minute chart okay so you decide on what increment here is good for your Y access I’d say it’s fifty cents you decide yep that’s pretty good now if I were to use a 60-minute chart let’s say I’m using multiple timeframes well I’m not going to use 50 cents on the 60-minute chart right then I’m gonna want to have a wider spread a wider range between those hash marks so just decide on what’s good free to your markets free to your timeframes set it and never change it otherwise it will be deceiving to your eyes so simple tip there but one that I find makes a big difference sometimes people where I find this really gets people in trouble is when they don’t know they’re in a consolidating market right and you know again this shows this consolidation here very very well and if it fills the entire screen and people think Oh mark it’s actually doing something significant there and they’re trading it and they get chopped up so this is one very practical tip on how to avoid getting chopped up in choppy markets all right so now by the way I’ve got a special course available for you then I’ll absolutely give you for free and in it I give one of my favorite trade strategies called the rubberband trade and you can get the rubberband trade all the setups the details where to enter where to get out all the parameters the rules the filters everything absolutely free just click the the green box there in the top right hand corner and it give you a little mini course that includes my rubberband trade also if you’re interested in more videos please let me know what are the topics you would like can leave that down in the comments below if you liked the video share it with others share good things with good people that’s one way you can give back I don’t run ads on my video channel as you know and so all I ask is that if you liked it again just be honest you know if you really liked it then go ahead and share it with other people and give it a thumbs up and all that kind of good stuff okay my friends will hope you got some value out of this lesson and happy trades you

14 thoughts on “Stock Chart Reading”

  1. watching this video makes me realise just how much i dont know about trading and how easy it is for the market to take all my money over and over again

  2. Thank you for doing this. I have 3 different platforms (I'm test driving two) and they were all over the place. It explains why they never looked the same – 1 hardly readable 1 taking the full screen. Most informative and much appreciated!

  3. An eye opener!! Thanks alot Dr. Barry….
    Would love it if you could do a video on day trading trendless or chaotic markets.. it seems to be the order of the day in Forex markets these days

  4. Sir i think RANGA BARS STILLgood to see how it works. as range bars have different output and we have to do it for every stock

  5. Hi Barry, I have been following your lectures of analysis and the are spot on. I'm a breakout trader and I'm lacking on entry and exit points

  6. I've lost two fairly large trading accounts partly due to not making this simple change. It can be extremely deceiving when the chart automatically fills the screen to fit the high and the low. I would typically trade NFLX and execute way too many trades that looked like fantastic opportunities at the time, only to get violently chopped out and later see that my entry had absolutely no validity whatsoever. This would happen all the time. I falsely attributed this mistake to various personal character flaws that I didn't even really have to begin with. Definitely play around with simple chart scale settings and see what happens. Small changes can certainly make big differences.

  7. Perspective analysis. I usually look at the Day chart before I check the others and then always look at the Price! This is what happens when people rush their analysis as they see something 'meaty' lining up and get stuck on the wrong side.

  8. Hello Barry

    what scaling time range do you personally use for 100,300, 900 tick charts and 1 minute , 3 minute and 9 minute charts as well as Daily, weekly and monthly time frames.

    Thanks

  9. I am appreciating your videos more and more. Allot of well known concepts are gone over a million times in various videos on YouTube. You have an ability to cover topics that are both valuable and not covered allot by other resources.

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