Make Your Charts Easy to Read: A Comprehensive Guide
Before I get started, you do have charting software, right? If not, check the link, and you will find some free software you can download. These programs will put professional tools in your hands that you can use to improve your trading exponentially if you are not using them already. The little charts you see on your trading platform are not sufficient for real trading. If you already have charting software, you know just how much power charts put into your hands. Here are some things you can do with charting software:
- View multiple timeframes, and plan your trades with the short- and long-term view. Determine the trend and see the bigger picture.
- See bars or candles or any other type of price display you want, and get a clear picture of what is going on.
- Plot indicators on your chart to help you spot potential trade entries. Your software will have a lot of indicators already included, and you can download more and make custom indicators as well.
- Save templates which include all the visual settings and indicators you typically use directly on them. That way you do not have to go through all the trouble to set up your charts each time. You can just load the template directly onto the asset and time frame you want to look at and get right down to business.
- Backtest trades. Using the historical data that your charts come loaded with, you can go back in time and step your charts forward one candle at a time and record whether you would have won or lost hypothetical trades in the past. This is an important step between coming up with a system and testing it live in demo mode.
Charts are useful for all those reasons and many more. But they are only as useful as you make them. It is difficult to get much out of your charts when they are hard to look at. It is a good idea to take some time to customize your charts and really think about what works for you. Some traders blow this off, while others are incredibly meticulous about it. Chart settings and preferences are as varied as the individuals who do the trading. Here are some tips for figuring out the best settings for your charts:
Select a background color that will provide you with a reasonable amount of contrast. Black and white are probably the two most common choices for just this reason. They make it easy to see your bars, as long as you choose colors which contrast with whichever one you choose for your background. You may find another color works for you, but just be sure that it will not clash visually with your bars.
If you plot candles or bars on your chart, choose a different color for bars which are bullish than you use for bars which are bearish. You can choose any two colors you want. The most common choices are red and green—red for bearish and green for bullish. Think of them like the colors of stop and go lights. Choose shades which are dark or light enough to contrast nicely with your background. Setting different colors for bullish and bearish bars makes it easy to instantly tell at a glance which direction price is moving. Price action traders will find it particularly valuable, since it may help them to spot formations more quickly.
Eliminate Clutter and Define Your Space
Use period separators. If you are using MetaTrader4, you can set up period separators between days. On some timeframes this is more helpful than on others. Unfortunately there is no easy way to define the periods (to set them to hours, for example, or four hour periods), but it can still help you keep track.
Get rid of the grid, unless you use it. If your chart has a grid of crisscrossing lines when you first load it up, get rid of the grid unless you actually like it and find it practical. The grid clutters up your screen, making it harder to see bars and indicators. If you actually utilize the grid, naturally leave it alone.
Add in Your Indicators
Once you have your chart looking nice and clean and easy to read, you will want to start adding whatever indicators you use to make your trades. These too should take a little extra thought. Maybe you have a lot of indicators, and maybe you only have a few. Either way, choose colors for your indicators that contrast with your background, and if possible, communicate some kind of a message to your brain.
For example, when I add moving averages to my charts, I use a rainbow color scheme that calls attention to the speed of the averages. I use warmer colors for slower-moving averages, because they have a slower wavelength in physics (this is just my way of remembering things). I use cooler colors for faster moving averages, because they have a shorter/faster wavelength in physics. Come up with some kind of a color scheme which you will find intuitive. This is like coloring your bars intuitively. It just helps your brain to focus and understand what it is seeing more quickly. The faster you can comprehend, the more effective you will be with your trading.
Temporary Visual Aids
Sometimes you will plot things on your charts to help guide your trading. They may not be indicators per se, but they are there to help you see what is going on and stay alert. When I trade, for instance, I will often plot support and resistance areas with horizontal trend lines. Usually I use dotted lines or dashes for these so that they do not clutter up my view of the price bars. That way I will stay alert for slow-downs, and will know which areas to keep an eye on and when I might consider early closure for a trade. If I were to use solid lines, my charts would be much harder to read, and I might not notice what price was doing.
Zooming In or Out
You also will want to set a zoom level that offers you the information you need to make intelligent decisions. Do not confuse zooming in or out with higher or lower timeframes. The timeframe of a chart refers to how much data is contained in each bar or candle. For example, on a one hour chart, each bar represents one hour of time. If you were to look at a four hour timeframe, each bar would represent four hours of time. If you looked at a fifteen-minute chart, each bar would be fifteen minutes. Four fifteen-minute bars worth of data are contained within a single hour bar. Twenty-four-hour bars go into each solitary bar on the daily chart, and so on.
Zooming does not change the amount of data in your bars; it simply pulls you in or out from the chart so that you can see more or less data at a time. Zooming out helps you to see market trends and get a better overall view. You might spot things by zooming out that would be impossible to notice while zoomed in, like MACD divergence. On the other hand, while you are zoomed in, you may notice things which you cannot see as easily while zoomed out, like the subtleties of price pattern formation.
Find a zoom level where you get the most information possible at one time, and make that your default view, but do not forget to zoom in or out as needed to take in more of the bigger picture or focus on what is happening right now.
What Timeframe to Look At?
The next question you might have is, “What timeframe should I be viewing?” Let us say for the sake of simplicity you already have decided what timeframe to trade, and you are going to be using daily price formations to make your entries. Some people find it easier to set the timeframe to daily and just look at the individual bars. Others prefer to open the hourly charts and look at each period as a day and see more detail instead. Go with whatever works for you, and helps you make the best trading decisions. You may also want to have another chart open at a higher timeframe so you can get a better look at the bigger trend.
Make Your Charts Clear for Others
Odds are you going to be posting charts online on binary options communities from time to time (or quite often) to get advice on trading opportunities or to get feedback on trades you already did. Charts are great learning tools, before and after you start trading live with real money. It is a matter of courtesy to try to upload charts that are clear for others to read. If you follow the advice in this article, your charts should already be easy for both you and others to understand at a glance.
You will probably want to put some notes on your charts though so others know what you want them to look at. Make sure you include enough bars before and after the entry and/or exit on the trade so that the context is obvious to viewers. Zoom out or center the trade so that you can accomplish this—but don’t zoom out so far that the bars are hard to see, especially if your question involves price action.
It is a good idea to draw a line or an arrow pointing at the bit of the chart that you are asking about, or to circle it. The lines and arrows are particularly useful if you are circling multiple areas. Choose high-contrast colors for these additions, as well as for the text you include. Use abbreviations when possible so you do not clutter your charts, but only if you are among others who will understand the abbreviations. Write in short, clear sentences or bullet points. Only put as much info on the chart as you need to, and then expand on it below in your post if you need to go into more detail.
When you make your charts clear before you post them, you are showing respect to the other members of a binary options community, and you also are making it much easier for them to help you out, which means you will receive more advice. And when you make your charts clear to yourself, you are simplifying your trading and making it far less likely that you will make mistakes or miss great opportunities. The better your charts, the easier you’ll find it to trade profitably, and the more money you’ll make!