How To Read Chart

pela78

Junior member
14 1
Hello, I am Oleg Alexandrov, Market Analyst. I do market research for private clients, trade on my own account, and provide daily market overviews for the Tradunity.com project.

In this thread, I will share my approach How to Read the Charts as a book.

What is Chart Reading

This is reading the Story of the neverending battle between buyers and sellers. By analyzing price & volume relationship, Chart Reader extracts the latest data of balance between Demand and Supply. Thus, he becomes capable to understand the Current Character of the market. Playing in harmony with the Market Character - this is the way to decrease risk and increase profits.

Warning. The main goal of the Market is to make as many fools as possible. Bernard Baruch.

So:
  • when majority expect pump - market dumps
  • when majority expect dump - market pumps

If you want to know the real reason for market moves - study who lose the money.
Focus on the Causes, trade Effect. Chart Never Lies.

Thanks for your interest. Be continued...
 
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pela78

Junior member
14 1
Used Acronyms
  • ND — No Demand; NDW, or ND-Wave — No Demand Wave
  • DB — Demand Bar; DW, or D-wave — Demand Wave
  • SB — Supply Bar; SW, or S-wave — Supply Wave
  • NS — No Supply; NSW, or NS-wave — No Supply Wave
  • SLK — Stop Loss Killer; SLKT — SLK at the Top (bearish sign), SLKB — SLK at the bottom (bullish sign)
  • EVR — Effort versus Result; EVRW — EVR wave; EVRT — EVR at the Top, EVRB — EVR at the bottom
  • SOS — Sign of Strength
  • SOW — Sign of Weakness
  • ZOS — Zone of Strength
  • ZOW — Zone of Weakness
  • SFDB — Support from Demand Bar
  • RFSB — Resistance from Supply Bar
  • TF - TimeFrame (period)
  • Cha Cha - Change in Character
 

pela78

Junior member
14 1
It is not, and never has been or ever will be a good idea to tell people when to buy or sell, because once you enter a trade, your emotions take over, and it is these emotions that will impede the trader.

I have never ever heard the real truth as regards to market action on television or in newspapers. As a trader, you will find you are constantly mislead by lies, roomers, misinformation. So on the basis of this information arriving on your doorstep will give you and thousands of other traders a completely wrong feel as to the markets real intent

Believe me, the markets move on the shifts of large blocks of professional money, tipping the balance of supply and demand one way or another, which to the trained observer you can read.

Supply and Demand

We have all heard the pundits in the money section of our news programs telling us that this market or that market, has gone up, down or sideways, for some specific reason or another.

The price of oil has gone up and the stock market has fallen. - for example.

Of course, at another time the price of oil will rise and the stock market will rise too - but nobody ever seems willing to explain this apparent dichotomy. The simple truth is that nobody really knows why news may have caused the markets to move in one direction or another. News doesn't actually drive the markets, it follows it.

Prices are driven by supply and demand. When demand is strong and supply is limited prices rise. When demand is weak, or supply is excessive, prices will head lower. If demand is strong and the news is, bad prices may still move lower, but the market will react less strongly than if the demand had been weak or there was too much supply. The market may even rise despite the worst possible news.

The key to trading successfully is to determine the balance of supply and demand in the market.

Many good traders have a sense of this without even trying, there are 'natural' traders who always seem to be on the right side of the market, but if you are not able to do this instinctively you can learn to do it through Chart Reading Method? And you will be amazed at how much you will learn in a short time.

Follow this thread daily.
 

pela78

Junior member
14 1
Have you ever seen that massive bad news come to the public at the market bottoms? And the best optimistic news bombards public heads at the market tops. So, better not to read the news, read the chart. It has the language that can be translated into the opinion. This is the way of judging the market's character by its own behavior.
 

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pela78

Junior member
14 1
After Distribution range (AB wedge 0.644-0.640), #NZDUSD produced the decline toward 0.636.

I expect a stalling of decline around this level because of two arguments:

  1. we have NS+DB sequence on the background (green zone).
  2. Bears completed the run equaled the height of the AB wedge. So, target C=B-AB is accomplished.
Watch for Panic Selling on faster TF

267596
 

pela78

Junior member
14 1
The recent moves on #BTCUSD market confirm the cruel nature of the market. Its goal - is to produce losses for the majority. Here is how it does work.

A) Downmove after a period of sideways dull. The bearish activity attracts traders (and their bots) into following the bearish impulse. Traders enter short positions (that is why we can see increase on BTCUSDSHORTS)

B) But if the market is really weak, it not interested in making profits for this portion of just-established shorts. That is why we got the second move B. It knocks out sellers from market by triggering their Stop Losses. This is an SLK move. Green spike on clusters represents the activation of BUY-stop orders. (that is why we can see a decrease on BTCUSDSHORTS). So, when majority is knocking out from shorts - you should sell. This is a way to act in harmony with winning minority.

A+B sequence tells a more bearish story. So, price has more chances to make the next step down.

267606
 

pela78

Junior member
14 1
#Gold Overview. Mixed Data from 3 Sources.

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Fake (or False) breakout is one of the most tricky things in trading. This is how the market (professional side) make fools (losses for retail traders). The number of Fake Breakouts increase at the psycho levels (round numbers). Look at 1550 blue line. We had very clear breakout divided into 2 parts:


1) Evening of 04 Sept (Blue arrow). Everything looks bullish, but look at the response


2) Red Arrows point at price falling amid an increase in volume. This is genuine Supply activity after Non-professional bulls were trapped above 1550. (Check the history - you will find Minor Trap Up-moves before Major Break Down in the 90% of cases, even on news events).


On the following days we got Stop-Loss-Killing above 1525 level (circled) and the test of center line of the upward channel.


Well, what is next? Actually, market is quite balanced. We have support from bottom line of up-trend channel with Demand Surge (green line) on the background. But if the bulls are really strong, we should see some sort of quick bounce from the line of support. Instead, price is chilling around 1500.


Intraday clusters (see additional chart) show the attempt of bulls to drive price up (after Trap for bears). But this bullish attempt can be quickly exhausted with mentioned signs of weakness above 1520. So, short-term outlook is neutral.
 

pela78

Junior member
14 1
This is #AAPL #stock, yesterday Price & Volume action, intraday fast TF. I use this chart to illustrate the principles that do happen in every market.


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The average trader can see here Head and Shoulder's pattern. What does see Chart reader? Up-Waves with exhausting of Bull's power.


1) The first up-wave collects 574k of Volume
2) The second up-wave collects 301k of Volume

3) The third up-wave collects 243k of Volume


The Volume on up-wave diminishes. It means the Exhausting of Demand Power. As a result we got "P" formation on the profile. What is the inner working? 1st up wave attracted FOMO buyers who wished to follow the rise of price. Professional traders use the FOMO surge in order to establish shorts. Study the clusters. If the busi trading activity above 219.30 does represent the real strength, market should pump. But it did trade in the range. So, "P" profile is the hidden Weakness.


And the appearance of Sellers (arrow 4) is a moment when retail bulls found themselves in bad positions. The appearance of Supply after No-Demand sign - is a signal to short. This is a way to trade in harmony with market.


So, does SHS have more sense now?
 

pela78

Junior member
14 1
Here is the intraday 5m cluster chart (or footprint) of #AAPL #stock.

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But the described principles below are valid for other markets/TF. Just think how people lose money - and charts become more full of sense.


1) market forms minor low. People tend to "hide" their SLs under low such this. Minute by minute, the number of SLs are growing there. When market "see" the number is big enough, it...
2) ..drop right there. This is an SLK - stop-loss-killing action.

3) And one more shot to kill more SLs.


4) Here is Demand wave: a) green clusters b) strong close c) breaking resistance. Plot SFDB on this level. Market should find support around 2019.80-219.90.
5) Supported.


6) This is a Trap for bears. Not very obvious. But study the price action. It was several bars of decline. Indicators encountered people and bots to sell. But what we got soon?
7) Demand bar. This DB was powered by SFDB level.


Market closed at 220.70. Just imagine the emotions of buyers who were knocked out from market at points 2 and 3.


From the short-term picture, market is bullish while price is trading above 220.10-220.20.
 

pela78

Junior member
14 1
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Is the current VETUSD (crypto) strong?

Well, technically we have a balance A-B, It was broken up by the surge of demand (point 1). Moreover, price is holding above SFDB line (point 2).

But personally I am skeptic about current rally. Look at the bottom. We have green-red indicator. It represents the balance between Bids and Asks. If those bids are fake? What if they can be withdrawn in one moment? If those bids are real, why is price moving so slowly in upward direction? The high A was gained easier?

So, we have buying signals on this chart (for example testing SFDB line), but personally I do not feel the confidence to follow them. Point C looks as the SLKT Trap.
 

pela78

Junior member
14 1
Yesterday I wrote about my skepticism related to VETUSD market. Actually, it made a step down as other Alt-Cryptos.
This post is dedicated to EVRt sign. I pick ETCUSD market to outline this sign in better details.

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Study the behavior of price /volume when the market did reach blue circle level. Think about the volume as the quantity of effort. And measure the result on the price axis. You can make a suggestion - bulls have spent a lot of efforts to push the market higher, but they did gain small progress. Market profile forms a shape of "P" letter. And how can the inner working be described? Professional traders put a lot of SELL-Limit orders above high A. That is why we have big volume and a small bullish result. This is a sign of EVRT (a sign of weakness).


Note the following response.

a) Price formed short term balancing wedge (blue lines)
b) Bearish movement - price decline amid rising volume (red lines).

This change in character confirms the weakness in EVRT wave.

What is next?
1) Huge volume down-bar could be interpreted as the attempt of market to shake out weak holders (hidden strength)
2) Price broke up in the upward direction from the balancing wedge (confirmation of strength).
3) Plot the SFDB around at the breakout level. While the price is holding above SFDB - intraday traders have the arguments to play in the bullish team.
 

pela78

Junior member
14 1
It was a poor morning for #GBP #GBPUSD. We have a very clear indication of weakness above 1.255.

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Falling price is entering the Zone of Support @ round number 1.25. It should produce some sort of bounce up. But Read the Chart. We have a lot of weakness overhead. Definitely, it will be hard for bulls to extend bounce up move into sustainable up-trend.
 

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