Charts?

[iccenuol]

Hi. First post, so excuse my apparent misunderstanding or inexperience. I've been looking at financial charts for a few weeks just out of interest, but I don't understand why there is so much variation in chart styles?

So, I look at any particular chart style and I have to make a decision buy, sell or hold over the coming months. I've only been concentrating on the major equity indices, these are a collection of stocks, and it seems that in general everyone wants the stock market to do well, although it can crash.

So, if the S&P500 goes down say 2% on a candle chart, then it goes down 2% on the rest of the chart styles. What are the advantages of using candles rather than bars or renkonk?

Thanks!

 

[Xela]

What are the advantages of using candles rather than bars or renkonk?

I don't know enough about Renko to comment.

Candles and bars both display exactly the same information (the open, high, low and close for each specified period on a timed chart).

The perceived advantage of candles is that "most people use them, these days", so it's really one of familiarization and ease of discussion, etc.

The difference between the two is that candles visally emphasize the opens and closes, while bars visually emphasize the highs and lows.

My own opinion (unrepresentative though it often is) is that highs and lows are objective and factual, whereas opens and closes are subjective and user-defined, and that highs and lows relate significantly to very local/fast levels of support and resistance, and for that reason I strongly prefer bars, myself (not that I use timed charts anyway), but it's only a personal preference.

There's no "right and wrong" with these things. Some people use line charts, Unirenko, range-bars, point-and-figure ("go figure"!) and all kinds of other stuff.

And welcome to the ET forum.

 

[lcranston]

My own opinion (unrepresentative though it often is) is that highs and lows are objective and factual, whereas opens and closes are subjective and user-defined . . .

My apologies, but this is not quite true. Highs and lows are "objective" depending entirely on how the flow of price movement is chopped up. The 1m/5m/15m etc that today's traders are so used to is both arbitrary and an optical illusion devised by software engineers in the early 80s. The divisions could just as easily be based on 2 or 8 as 5.

Price moves in ticks, not bars (or candles). Those ticks can be bundled in a near-infinite number of ways, whether by number of ticks or number or seconds or some other basis. But none of that changes that fact that price moves in ticks (transactions) and that it's continuous, that is there is no such thing as a "close" intraday (there is of course a close when trading halts at the end of the day or week).

For example:

The "bar" is simply a connect-the-dots line provided by the software one uses, but it doesn't exist in the chart, anymore than Taurus exists in the night sky.

Most scalpers understand this, of course, but the mystery of price movement would more likely be less so even to those who don't scalp -- who, for example, trade swings -- if they were to focus on the price movement itself rather than on how that movement is translated into bars and candles. For example, just how many ticks/transactions are logged into a "long" 5m bar or candle? 15? 3? 60? The high and low of the bar will be the same, but it would behoove the struggling trader to know just how that bar came to be. If he doesn't know, charts may continue to defeat him.

 

[Xela]

My apologies, but this is not quite true. Highs and lows are "objective" depending entirely on how the flow of price movement is chopped up.

Strictly speaking this is perfectly true. I always oversimplify, in what I say on this subject. (I normally get away with it, Mr. Hawkeye, but you're quite right, of course!).

The example that springs to my mind is always the old Joe Ross discussion about what happens if you trade from 9-minute charts instead of 10-minute charts, and/or if you start your timed bars off at one minute past the hour instead of on the hour. Of course you're trading from different charts from everyone else (not always a bad thing), but realistically nearly all the highs and lows on your chart are at the same levels as those of your "more orthodox" timeframe-equivalent traders: it's the opens and closes that are all different, "because they're ultimately user-defined".

 

[tomorton]

This is good perceptive stuff lcranston, and probably goes to explaining why traders entering off a single bar/candlestick or precise combinations of two or three bars don't do so well in the long run.

iccenuol - Keep it very simple. Look for an uptrend. Understand how you recognised it as an uptrend. Add a moving average, see how that changes your perception and brings in new characteristics that help you define this as an uptrend. Then find a second uptrend on another chart and add the same MA to that. Which trend is better for your strategy? What are the points that make one better and one less suitable?

All chart patterns start with trends.

 

[Jack1960]

Why are you looking at charts for a few weeks? This is too long. A few seconds is enough.

 

[Handle123]

I don't know enough about Renko to comment.

Candles and bars both display exactly the same information (the open, high, low and close for each specified period on a timed chart).

The perceived advantage of candles is that "most people use them, these days", so it's really one of familiarization and ease of discussion, etc.

The difference between the two is that candles visally emphasize the opens and closes, while bars visually emphasize the highs and lows.

My own opinion (unrepresentative though it often is) is that highs and lows are objective and factual, whereas opens and closes are subjective and user-defined, and that highs and lows relate significantly to very local/fast levels of support and resistance, and for that reason I strongly prefer bars, myself (not that I use timed charts anyway), but it's only a personal preference.

There's no "right and wrong" with these things. Some people use line charts, Unirenko, range-bars, point-and-figure ("go figure"!) and all kinds of other stuff.

And welcome to the ET forum.

LOL, actually I agree with this more, there are highs and lows no matter if hourly or ticks(I consider tick charts to be bars of one increment), still going to have exactly same highs/lows, can't change that. And yes, I have tick chart open for few patterns that won't show on one minute bars, but one minute allows for less noise than tick chart, any many data providers don't give all the ticks.

My apologies, but this is not quite true. Highs and lows are "objective" depending entirely on how the flow of price movement is chopped up. The 1m/5m/15m etc that today's traders are so used to is both arbitrary and an optical illusion devised by software engineers in the early 80s. The divisions could just as easily be based on 2 or 8 as 5.

Price moves in ticks, not bars (or candles). Those ticks can be bundled in a near-infinite number of ways, whether by number of ticks or number or seconds or some other basis. But none of that changes that fact that price moves in ticks (transactions) and that it's continuous, that is there is no such thing as a "close" intraday (there is of course a close when trading halts at the end of the day or week).

For example:

View attachment 185311

The "bar" is simply a connect-the-dots line provided by the software one uses, but it doesn't exist in the chart, anymore than Taurus exists in the night sky.

Most scalpers understand this, of course, but the mystery of price movement would more likely be less so even to those who don't scalp -- who, for example, trade swings -- if they were to focus on the price movement itself rather than on how that movement is translated into bars and candles. For example, just how many ticks/transactions are logged into a "long" 5m bar or candle? 15? 3? 60? The high and low of the bar will be the same, but it would behoove the struggling trader to know just how that bar came to be. If he doesn't know, charts may continue to defeat him.

Highs/lows are "optical illusion"? A high is a high and low is a low, tick chart will show how many times it may have hit that low, but the tick doesn't show volume, so are we now going to use some variation of tick/volume chart as volume certainly has more information than ticks, no volume price goes nowhere. Isn't it just semantics whether tick/minute/monthly etc? I do believe closes are more important than when programmer coded program to end on certain time, or can they be controlled? I often wonder as many times they will stay in body of last bar. Oh, one can build their own charting and make bar end whenever they want them to be, but why mess that up, I want to be able to watch how the masses are viewing it and take other side mostly.

@iccenuol And studying charting a whole couple weeks, WOW ready to make millions now.
When you have these to memory and few years of back testing, then this post will seem like "did I even ask the forum this question"?
http://thepatternsite.com/

 

[maximumpossiblesuffering]

I have been toying with the idea that charts are not necessary for day trading. Using the previous day's high and low as well as the current day's open, high, low, and last combined with tick action and statistics according to time of day might be all that is needed. One's entrys, exits, and stops may possibly be determined by price threshold and deviation analysis. Stocks about 70% of the time will take out their previous day's high and or low and a stock's typical daily range is quantifiable.

For fun, and hopefully profit, I may document the results of this idea on a trade journal thread entitled, "Look Ma, No Charts!".

After all, even a nut can find a blind squirrel sometimes!

 

[speedo]

I have been toying with the idea that charts are not necessary for day trading. Using the previous day's high and low as well as the current day's open, high, low, and last combined with tick action and statistics according to time of day might be all that is needed. One's entrys, exits, and stops may possibly be determined by price threshold and deviation analysis. Stocks about 70% of the time will take out their previous day's high and or low and a stock's typical daily range is quantifiable.

For fun, and hopefully profit, I may document the results of this idea on a trade journal thread entitled, "Look Ma, No Charts!".

After all, even a nut can find a blind squirrel sometimes!

In the absence of a tin cup and sunglasses, a blind squirrel has a hard time making a go of it.

 

[iccenuol]

Wow, I didn't really expect much of a response, so thanks to all for the replies. Some, or most, of the information is a little over my head at this moment in time.

Here's what I'm thinking. The market basically went up last year in quite a smooth fashion, until the new year, then it kind of went crazy, for want of a better explanation. It's become highly volatile. I'm using daily slots to view 6 to 12 months of the market at a time. The line chart doesn't seem to show the low, whereas the bar chart shows the absolute low of any given day period, so it's accurate in that sense. I just wondered what the difference between candles and bars was, if any, in their representation?

So sometimes the market goes up and down 1% on a daily basis, then at other times 2%. Overall it may lose 5% in a week for example. Is it better to use the larger variation figures to compile a plan of attack? The logic being - it changes less.

I hope I've explained that in a coherent manner (I know what I mean )

Thanks!