Utilizing charts when trading will be of utmost importance to maximize your trading potential. In this short piece we will be going over charts that help you optimize your day trading.
Throughout this short piece, the best charts for day trading in the modern day will be broken down in-depth. There will also be a lot of guidance and tips in how to best implement these charts into your trades.
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Best Charts For Day Trading
When looking amongst the massive variety of charts that are offered to you as the trader, it is important to try and discover which of these charts is the one that reflects your unique style of trading.
Every chart is different, each with their own pros and cons.
When getting into intraday trading, you will struggle to find a form of chart more widely popular than line charts. These charts only show you the closing price of a trade, for example, the closing price of the final five minutes of a trade, just as an example.
The closing price of each particular trade will follow on to the next closing price of the next trade in a continued line on the chart. You as a trader would probably not want to hedge all your bets on line charts alone, however.
Bar & Candlestick Charts
These are the forms of charts that provide the most information to the trader, which is what makes them so widely used.
When using a bar or a candle, the size of it will vary depending on the time you have begun at. If a price of a bar has begun every 5 minutes, then the chart will show the price of the initial trade that had began at the start of the initial five minutes, as well as both the most and lowest prices during the period in between. This is why these charts are so popular, they offer a variety of variables to look upon as the trader.
These charts are essentially a straight line, these lines are representative of a price range of a trade at a certain time. The Horizontal lines are representative of opening and closing prices of trades. These charts are a more detailed version of line charts in their essence.
Ticks are not often used by traders, although they can be helpful. Ticks essentially allow you to time your entry into trades easily. Essentially, in high periods of trading, the tick chart will take note of important info that other charts would not usually be taking note of.
This form of candlestick trading had begun all the way back in the 1700s in Japan. This form of charting is useful as it makes the information you need very easy to go over and view. They streamline a lot of the important information you’ll need whilst binning all of the fluff.
Renko charts are vital in showing you specifically any price movements. If a price were to go above or below the previous brick used, then the chart begins a new brick.
With a Kagi chart, it needs the opposite amount you clarify in % or price change. If the initial price moves in an opposite direction, then so does the chart along with it.
The lines in a Kagi chart will be all different widths throughout the chart. If a market moves up than it previously was, then you’ll notice the lines will start to become more thick and vice versa. These charts specialises in making the swing of highs and lows in trades very clear to see.
The time displayed on the charts will be what decides the amount of information that the chart will display. Sometimes, these charts will hone in on a number of trades rather than the time:
If you are due in for a busy day of work or whatever else you need to do, then use a lower time frame when using this display, otherwise you’ll have to find time to sit at your computer all day to keep an eye, and vice versa if you have lots of spare time.
Technical indicators are also very important when it comes to deciding your chart setup. When the conversation of time frames arrives, there is no certain answer that can be given. Just consider how long you’ll be able to maintain occupied screen time along with what time frame will the technical indicators that you have chosen work to their best potential alongside.
Understanding Day Trading Charts
Having your chart system arranges is pointless if you are unable to understand everything involved with the charts.
Technical Indicators to make use of
If you were to have too many indicators on your chart then you can easily begin to get lost in the lines, slowing down your production. Make sure you are only using the most popular indicators, such as some of the following:
- Volume indicator – This will allow you to know when a number of significant transactions are happening, along with whether or not any of the big hitter traders are involved.
- Simple moving average (SMA) – This will show any major price movements early on. If you were to go for a slower moving average, then you may run the risk of losing any potential profit if a trend ends or backpaddles.
- Average true range (ATR) – This helps ensure accurate trading decisions are made. This indicator shows volatility of an instrument based on its price. This highlights individual accuracy when trading.
- Oscillators – This indicator is most prevalent when a trend of a trade is not obvious, of which the most popular are Commodity Channel Index and MACD for a few examples.
To know the best time to exit a position that you are holding, you must keep an eye out for the best patterns. Below we have compiled a list of some of the best patterns that a trader can make use of:
- Cup and handle patterns
- Late consolidation patterns
- Outside bar at resistance or support patterns
- Spring at support patterns
- Pennant patterns
- Morning consolidation patterns
Using good charting software is what will put you ahead of the curve to allow you to make visually understandable charts to analyse. Here is a list of some of the usual charting software’s below:
- MetaTrader – This is the most ideal when using forex charts, this has a detailed and smooth designed chart for the trader to make use of.
- eSignal – With this software, the trader can make use of detailed customisability when trading, however on the downside the number of indicators is somewhat kept to a minimum.
- NinjaTrader – NinjaTrader is best known for its extensive number of formats, and very easy to understand charts.
- Sierra Chart – With Sierra Chart, you’ll gain access to both easily made charts along with analysis tools galore. You will also have the opportunity to make use of a demo account if you so wish to before delving in deep with your own money.
Free charts are great to begin with and offers a lot of the same tools that you’d get if you were to make use of a paid chart. Below is a list of some of the more common free charts that are available:
- Technician – Offers day charts for US markets and forex.
- TradingView – You get access to both forex and bitcoin charts, along with gaining access to 1,3,5 and also a 15-minute time frame display for your charts.
- FreeStockCharts – You have access to a wide selection of available markets, as well as access to 1,2,3,5, 10 and also 15-minute time frames. This is a very detailed chart that one can make use of completely free of charge.
Charts, when used efficiently and in a detailed manner can help you essentially to predict the future in terms of any potential price changes. Free options of charts are always a healthy option to, you should be on the lookout for charts that offer customisability as well as an offering on the use of tools that can help you become aware of any trend of patterns in the trades you are pursuing.