Line charts and candles are two most oftenly used charts by almost all types of traders.I have been using both and with around more than two year’s experience now I can write down difference in their usages for different types of trading.Present is the time for short term trading in nifty futures and options.One can not take a long term view and go ahead with it because the volatility and uncertainty of the market will eat up whatever options offer in long term view.So I will first talk about intraday trading in NSE.
Line charts show you only one thing,the closing price.Of course one can adjust and see other prices too but closing price is the best.In intraday trading a trader needs to catch the trend before it turns.Catching a turning trend is swing trading which is not very profitable in intraday time frame.An intraday trader will need the best chart to see where price is heading.If one uses candles for intraday one can chose the refresh time for those candles.Often people use 3minutes,5minutes and sometimes even 10minutes candles.Choosing 15minutes or longer candles will not give many signals and their interpretations are bound to be too delayed.The trouble with candles in intraday is that they show too much information in needless ways.There will be open,high,low and close in each candle.One only needs to know the latest price and not the other three.If one uses line charts one will only see the latest price in a single line.Interpreting a line chart is much easier than candles.See an intraday candle chart and a line chart for the same stock and you will find that there are too many candles in the same chart and often you will be stuck with patterns being formed by those charts.
Candles help in interpreting when you have more time to stay in a trade.Their patterns are good only when they stand a test of time and this is exactly what they don’t qualify in intraday trading.You only have few opportunities to start a trade and exit with a profit so you need a chart that gives you quick information.Candles have patterns and interpretation is based on these patterns but in intraday charts there are simply too many patterns.You have to discount high low and open price of a candle.If at all one wants to use the candle one can do so by using more than 15 minutes candle and trade within the time frame of one candle.Which means your trade starts when a fresh candle begins and as this candles completes its shape you will come out of the trade.This is too much of trading,not highly profitable.
Rather try to catch the trend.In options trading one can see that cash market and derivatives markets are not always related.Sometimes there is a move in cash market and you can see derivatives not moving an inch or even moving in the opposite direction to where they should have gone.This is why swing trading within intraday time frame is very risky.Not every swing will give options a perfect effect.Try using line charts with trendlines.Trendlines are also very easy to draw and interpret and often they are very accurate.Also line charts show the latest price faster than candles.And it is easily predictable too.For options traders it is of utmost importance to be able to catch the latest trend of price and in doing so nothing is as useful as line charts.Don’t rely too much on standard formations,rather follow the latest line and move with it.At best use trendlines and before using them make sure you study all things about trendlines.
Candles,however,are not simply useless.They are the best charts for medium and long term investments or day trading and swing trading.For this kind of trading one needs to know all levels of price – open,high,low and close.Line chart will only give you close price and based on this one figure good decision can’t be taken in long term.Often you will see a sudden move in price in a day,while this move is useful for intraday trading it doesn’t hold that much importance in long term trading or investment.Any move has to be substantiated by good volume too.Candles will show you these sudden moves of the price in EOD charts and you have to make sure you study them well in comparison with the overall view of the day price range.Candles have better and more true patterns in EOD charts.There you can test them with the time factor too.And standard formations yield better results.
The bottom line is – if you are an intraday trader chose line charts and if you are longer term trader (longer than intrday) then chose candlestick charts.
Line charts show you only one thing,the closing price.Of course one can adjust and see other prices too but closing price is the best.In intraday trading a trader needs to catch the trend before it turns.Catching a turning trend is swing trading which is not very profitable in intraday time frame.An intraday trader will need the best chart to see where price is heading.If one uses candles for intraday one can chose the refresh time for those candles.Often people use 3minutes,5minutes and sometimes even 10minutes candles.Choosing 15minutes or longer candles will not give many signals and their interpretations are bound to be too delayed.The trouble with candles in intraday is that they show too much information in needless ways.There will be open,high,low and close in each candle.One only needs to know the latest price and not the other three.If one uses line charts one will only see the latest price in a single line.Interpreting a line chart is much easier than candles.See an intraday candle chart and a line chart for the same stock and you will find that there are too many candles in the same chart and often you will be stuck with patterns being formed by those charts.
Candles help in interpreting when you have more time to stay in a trade.Their patterns are good only when they stand a test of time and this is exactly what they don’t qualify in intraday trading.You only have few opportunities to start a trade and exit with a profit so you need a chart that gives you quick information.Candles have patterns and interpretation is based on these patterns but in intraday charts there are simply too many patterns.You have to discount high low and open price of a candle.If at all one wants to use the candle one can do so by using more than 15 minutes candle and trade within the time frame of one candle.Which means your trade starts when a fresh candle begins and as this candles completes its shape you will come out of the trade.This is too much of trading,not highly profitable.
Rather try to catch the trend.In options trading one can see that cash market and derivatives markets are not always related.Sometimes there is a move in cash market and you can see derivatives not moving an inch or even moving in the opposite direction to where they should have gone.This is why swing trading within intraday time frame is very risky.Not every swing will give options a perfect effect.Try using line charts with trendlines.Trendlines are also very easy to draw and interpret and often they are very accurate.Also line charts show the latest price faster than candles.And it is easily predictable too.For options traders it is of utmost importance to be able to catch the latest trend of price and in doing so nothing is as useful as line charts.Don’t rely too much on standard formations,rather follow the latest line and move with it.At best use trendlines and before using them make sure you study all things about trendlines.
Candles,however,are not simply useless.They are the best charts for medium and long term investments or day trading and swing trading.For this kind of trading one needs to know all levels of price – open,high,low and close.Line chart will only give you close price and based on this one figure good decision can’t be taken in long term.Often you will see a sudden move in price in a day,while this move is useful for intraday trading it doesn’t hold that much importance in long term trading or investment.Any move has to be substantiated by good volume too.Candles will show you these sudden moves of the price in EOD charts and you have to make sure you study them well in comparison with the overall view of the day price range.Candles have better and more true patterns in EOD charts.There you can test them with the time factor too.And standard formations yield better results.
The bottom line is – if you are an intraday trader chose line charts and if you are longer term trader (longer than intrday) then chose candlestick charts.
No comments:
Post a Comment