Changing out the Lens

For those who take the time to study charts, either your own or those posted by others, I wanted to highlight today the importance in embracing the differing perspectives offered in chart styles/types. One way to do this is to “change out the lens” by utilizing different chart types yourself.

Some may argue that there is little value in doing so, or that they are comfortable with their system so why change. I can understand that position. But I want to make a key point here as to why I think it is important: traders in the market are making trade entry & exit decisions based on a variety of chart types,  not just the one that you happen to utilize. A trader needs to know that fact, be aware of the differing views, and work to incorporate those views into their trade prep. Not everyone uses Candlestick charts so I contend that broadening your chart views gives you an edge – by knowing what the other chart styles may be saying about a particular stock movement.

Some examples to illustrate. Here is an Area chart of  AGQ (ProShares Ultra Silver):

With an Area chart, you get a cleaner view of the peaks & valleys in price movement. Although Gaps are not visible, it does allow for a quick grasp of the overall price action.

I use these charts when I just want a simple look at a stock.

Now on to a normal Candlestick chart.

Here we have a Daily chart of CMG showing the candles for price action for each day. Gaps are shown as well as Open & Close prices. The wicks help to show Low & High for price on that given day as well.

Most traders seem to utilize this style of chart along with OHLC Bar charts as the 2 most commonly used chart types.

However, let’s not forget another style that is used  by traders. That style is Point & Figure (I call it PnF) charts.

Here is a PnF chart on SAM (Boston Beer). It is likely that many mechanical traders utilize this chart style to plug-in their trade entry or exit.

I often use this chart style to either confirm a trade setup or it causes me to pause for more study if it conflicts any way with my normal candlestick chart.

Other styles I see mentioned are Renko charts. These too are worth study & can also provide an edge over other traders that may have too much of a one-dimensional view.

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