Welcome to Module nine. In this module, we will be looking at how to read a chart. This module is comprised of three parts, we will start with part one. And in this module we will be looking at all aspects that involve the configuration reading and interpretation of char data. This module will be slightly different to the other modules in that I will cover many practical examples to help you better understand the various aspects of reading and interpreting chart data. And all examples will be shown using the free charting platform available on tradingview.com.

The first part will look we will look at chart types and chart elements. In part two, we will be looking at your price movement and price action more specifically, your Japanese candlestick patterns and then very importantly, we will conclude the module eight with major labels that you will Look to identify and trade off. So first we will look at your chart type. Now there are many different charts out there each presenting price dates and different way. Some of the chart types that we'll be looking at are as follows. That could be your line chart, candle bar chart, I can actually chart as well as your wrinkle chart starting with the line chart.

Now launcher is a very simple representation of closing prices in a typical connect the dots fashion, it's very straightforward and easy to understand over. a drawback would be that it is difficult to see your price action elements. Looking at an example. Here's an example of the Bitcoin USD price. As you can see, we are currently looking at a one day time frame. In other words, each dot represents one day worth of trading.

So How to launch or Typically, this is that it can next the last price or the closing price for that timeframe. And that day, it will connect to exist looking at a one day timeframe we are connecting your closing process and this actually gives you the chart and as you can see, it's actually very easy to understand. So, looking at a different example say a one hour time frame, it see looks exactly the same, but instead of now we each.or a point would represent a one day with trading we are looking at one hour worth of trading. So that would be your line chart. Looking at your candlestick or also sometimes called a bar chart, depending on how you read it. The candlestick or bar chart which is also sometimes referred to as a Japanese candle.

Stick pattern or Japanese candlestick chart was designed to instead of only showing closing prices of each time unit will show both the opening and closing price as well as the highest and lowest price reached within the time unit represented. Now the shape of the ball represents that the candlestick and hence got its name as you can see. Now with the line shot, we were only looking at this spot that is the closing price. In other words, price close at a level so we are only connecting a closing price with closing price. Now with the candlestick we are looking at four different elements. Within each time unit.

We will be looking at the highest point reached within the trading period. The lowest point reached the opening price as well as the closing price. Now, price can either close or lower than it open which would perform error rate red candle open can close higher than open which was former green candle. So it's just a simple representation of how that would look. But we will have a look at an example from the short soon. Now pursuant to that you can clearly see your price action and this we will discuss in part two of this module.

And Cons would be that it could take some time to learn how to interpret your candlesticks or price action but I will do my best to help you understand those. So let's look at an example. So again, here we are on our Bitcoin USD chart we are still looking at a line a line chart. I'm going to switch it over now to your candles over here as you can see baseballs and candles. Pretty much the same thing. As you can see, let's just switch between candles and ball so that you can see as you can see, cameras are just folding More and with your boss you just have your opening closing points represented by a little left or right hook.

But let's look at candles. So here's a candlestick chart. As you can see this is a very popular chart type and what's nice about it is that you actually have very nice points to actually draw trend lines support and resistance etc. And we will also use this to interpret some price action as we will show you in the next part of this module. Okay, so, as you can see, let's just look at that last candlestick. So we can see that in this trading session, we are still on a one hour time frame, which means that each candle represents one hour worth of trading.

Now, if we were to switch to say for instance, With a five minute chart, that means it would be if you're looking at a five minute chart, or let's just keep it simple sorry, this is simple. If we were to move to a four hour timeframe, you would be looking at that last four candles. So, as you drill down into timeframe, you are looking at a more detailed view of what is happening such as let's look at a four hour timeframe. So as you can see, so that is basically four hours with training data. So you reach the high of $99,295 a low of $9,262 we opened as a disable which would be 9354 and we be currently at 9020 that is the current closing price. So we will see what this ends but this is the current closing price.

So looking at Green candle, for example, you'd see that be opened at that level 9368 and closed at 9428 life wasn't born 50 about So, this is your candlestick chart very popular and I also pretty much use this exclusively. The next chart is the chart and this is basically to verify candlestick chart in the sense that instead of using the high low open doesn't process it uses an averaging formula along with values from the previous time unit to paint this picture of the overall trend. And as you can see here I've given you the formula as you used to calculate and different areas in the in the candle that would be your close open high low. And as you can see, for instance, the cloud is comprised of the average of the open high low and close your open consists of the average between the open up the previous point close the previous point and then your height would be the highest of the above.

And that would be the lowest of those values. But I'm practicing your approach and we can shoot it will really help you to identify trends. As it is averaging out your price action, cons would be that it could be difficult to interpret and doesn't affect the true price range. So let's look at an example. It switched to I cannot see up here. And as you can see, things look very much different.

So let's just switch back to a Gantt chart. So the Gantt chart, you will see a lot of green, red, green, red different colored candles, where as with the I can actually you'd see almost green or red exclusively depending on the trend. And that is due to the averaging formula that is used. So very nice to identify trains as well as maybe impulse movement correction moves but he is This is your high kanashii chart. So I hope you understand better how this works. Your Renko chart now Rinker is permitted rock from the Japanese word meaning Ringa meaning bricks and is a short thought that looks only at price movements created in a certain threshold.

And then these are plotted as equal sized bricks or boxes are the up or down depending on how price is moving. Now Renko charts do not take into account time. And because Renko charts have minor price fluctuations, they are very useful when used in conjunction with other charts to identify Major support and resistance areas as well as the current primary trend. Pros include it will help you to eliminate noise and major trend is clear and it ignores minor brass section comes Well, we are only looking at price some people wouldn't even consider that approach. And only major price movements is sharp. Let's look at an example.

So, let's have a look at Renko. There we go. Here is a Renko chart, as you can see, each block let's have a look, each block represents the trust cookie determined this are these 8000 and there is 7000 just want to determine how big block size is 11,002 In fact, so it's about $500 in this instance. So this Renko chart, so each down Movement represents $500 movement down or $500 movements up and that is your Renko chart. So you can clearly see the trend, either being up or doubt. And what's what's interesting about this if we move back to candles, you see that it looks very much different to the other price types as your other price types are clearly and measured according to the time unit or the day, hour, minute etc.

So in other words, we with a candlestick chart, each bar would represent exactly one day, one hour, your Renko chart is not bound by that limitation as it was a paint on how long it took to actually move that say $500 for instance. So, to move from one Renko block to another, it could be anything from hours to days. And I just show you an example what I mean. You can add a candlestick chart again. So, let's look at a $500 movement say Let's start every year. So we are at $6,800 every year.

Now to represent one wrinkle block, we would need to move up size six, and from 6800 $500 up. So that would be 7300. That would be around. So that'd be one wrinkle block, and from 7300 to 6800, which would be to the second block. So this would represent two Renko blocks up, suddenly down to be the same. So to move from this area of 11, five, down to 11, that would be one wrinkle block and from 11 down to 10.

Five would be another block. So one, two Renko blocks. So we're not really looking at a time element we are only looking at price pure price movement, and that is Rinka. Now choice can also be represented in one of two scales. The first one is your linear scale and that means that you have equal spacing between each measured unit. So this would be your price scale and it is usually represented vertically, I'm just showing you the example and horizontally over here, but this is usually your process.

So say we moving from hundred 200 to 300 to 400 to $500, etc, where your log and log chart, each unit is based on the percentage move measured from the first move. So, our first move in this example moves from 100 to 200. Now from that is 100% movement now from 200 to 300. If we would look at that based on our first move that is to get from 200 to 300, that is a 50% move. So, we are only looking at half the move the area of 200 to 200 moves so that's what's half the size. So to move from 200 to 400.

So, that would be the same as 100 to one as that's it. That's 100% move so hundred percent. From 400 to 800, hundred percent move it 2600 hundred percent move. And as you can see, because the values are getting higher the spacing we get closer and closer together, looking at an example. Let's go back to Bitcoin. And let's look at a weekly chart.

Because Because we know that Bitcoin was actually extremely volatile, and with very large price movements here in the end of 2017, and as well as in the beginning of 2018. Now, the chart almost looks skewed when you look in a normal, normal white as your linear your linear chart. And that is because the price price movements in the beginning of 2013 2014 2015 is very, very small compared to your latest price movements. So this is actually a very nice example to actually show you the difference that long shot will make. But this is quickly go to say 2015. As you can see, the chart actually changes.

That's because we have auto scaling on some other words, we are filling the screen with data from April to October 2016. And you can see the price movements. In their own respect were actually quite large and volatile in that period. But when compared to like the price movements, it was very small. But what the look chart will do is let's enable log, toggle log scale log chart able. So what you see now is that everything actually looks very much the same.

And that's because we are looking at scale based on percentage move. So, for instance, our first move was from I say $100 to maybe say $200. So that represents 100% move, so to get from 200 to 400 would be today from 400 to 800 they from 800 to six, they found 63,002. So, as you can see, the spacing remains equal every hundred percent move is equally spaced. So, that actually brings into perspective our larger price movements in the end compared to a non lock shot. So, that is the benefit of lock charges helping you to scale down your very extreme price movements especially on your longer time frames, not much use for a long shot on smaller timeframes, because, if we look at example, a one hour time frame, we our prices are mostly irrelevant relative to each other.

So, as you can see, switching between log and linear not much difference. So that is the difference between log and linear looking at different time frames in a chart, so the time frame negates a 20 period that will be represented by each point or unit on the chart as we briefly touched on already. And for example, looking at a bar chart, each bar will be represented by either one of these or these even more options, but it will represent the during training period, as indicated here, looking at an example, back to Bitcoin, so, looking at one hour time frame on this candle, candle, candles jata it See that's one hour of trading one hour of trading one hour of trading. Now if you were to draw a draw down 15 minutes time frame, so that is one hour, one hour, one hour. So every two candles which represent one hours with trading with each candle represents the timeframe selected, and that is timeframe.

Now when you're looking at price dates on a chart, you can look at one of three price stocks. Now you can either be in Looking at your bid price and that is the price that buyers are willing to pay, which would be usually below it in your asking price and the asking price is the price that sellers are willing to sell at, which is usually high. And mid price as presented by most trading platforms would be the average between the bid and the ask price. So in many training platforms, I haven't seen this in training view you can actually switch between your bid and asked price or bit asked and mid process. But I think in training view, you are just looking at the mid price. And it's it's an example let's say you have a short and you are looking at the mid price and we are looking at the share price at $100.

What this could represent is the bid price that was possibly $99 because the bid price are usually lower than the ask price. So that means your sellers are asking on one dollars Where's your buyers only willing to pay $99 So that would give you a price of $100. Okay, pips or points so when measuring price movements or when specifying your stop or target people see you can usually do so using what's called pips or points and that would depend on the instrument that you use. When looking at forex. For example, we usually work with steps, which is calculated from the fourth digit after the decimal point. So in other words, a movement from from one to 1.0001 would be considered one that move.

So this is a quick screen grab from the Euro USD, as you can see, so pips are measures from the fourth digit 1234. I draw, draw an arrow for you. Yes. So if we were to move from 1.1900 to 1.19, to one, that would be a 21 PIP move. Your spread is also calculated in pips. Net would be the difference between your buying and selling forbidden asked price that is your spread.

Looking at an example from the NASDAQ, so this is your index and it's usually calculated points. So, as you can see, you are looking at the values in front of the digit. So currently we are standing at 6612 points and move back to 6600 to be a 12 point move down. You can see your spread at this stage is two points that is 6612 and 26614. So that's a two point spread that means your your buyers are willing to sell at a price of 6612 and your sellers are wanting a price of 6614. And so as mentioned when looking at index plus two, usually with points and these are basically the very before the decimal point.

For example, a movement from 1000 to 1000 thing would be a 10 point move. That concludes part two of free and if you have any questions, maybe just waiting to the spot free, but always feel free to mail them to me at info at effects automated.com