Understand Your Trading Platform - The First Look At A Chart - (2024)

Most trading platforms are very similar in the way that the information is arranged. Usually, when you open up your trading platform, the price area is the biggest area that jumps right at you. We will talk about price charts in the next point.

Below the price area, you usually see some pre-chosen indicators. For now, it’s enough to know that indicators take the price data from the price charts and transform it into visual information such as graphs, bar or other oscillating lines. We analyze indicators in detail later on.

Below that, you usually have information about your account, past trades or open positions. Traders often refer to this information as P&L, which stands for Profit and Loss and which shows you the current gain or loss of your open trades.

On the left, you typically find more instruments to choose from with their current prices. Also, most trading platforms provide an additional list with further trading tools or other indicators on the left.

The top menu gives you access to all the functions. There you usually also find shortcuts to select different timeframes, change the way of the price graph (more to it in the next point) or directly add indicators.

And this is basically how most trading platforms are designed. Of course, you will see slight variations, but for the most part, this guide will make the initial steps easier and less overwhelming for you.

Understand Your Trading Platform - The First Look At A Chart - (1)

The basic structure of a trading platform – click to enlarge

Reading Charts for Beginners

Line graph

The line chart is the stock chart that looks so familiar because we have seen it through our whole lifes in TV and newspapers. The line chart compromises all price information into one single line. The line graph comes in handy when you want to get a broader picture, but it misses a lot of information as we will see in the next point.

Bar & Candle

Bar Charts and Candlestick charts are mostly used by traders (especially technical traders) because bars and candles show the volatility and all of the price movement, whereas line graphs only show the closing price.

Understand Your Trading Platform - The First Look At A Chart - (2)

Comparing candlestick and line graph – click to enlarge

The candlestick

A candlestick (short form: candle) represents the whole price movement for the specific period. For example, if you watch the 1H chart(1-hour chart), each candle represents the price movement of one whole hour, whereas the line graph only gives you one point for each hour.

The candlestick has 2 elements: the body and the wick. The body is the box-like part which represents the distance between the opening and the closing price. The wicks show the highest and lowest price for that period.

Understand Your Trading Platform - The First Look At A Chart - (3)

Candlestick basics I

The wicks are the thin lines ‘sticking out’ at either side and which represent the highest and the lowest price during the specific period. Read the advanced candlestick guide here.

Time-frames

Time-frames describe the time horizon for the displayed price information in your charts. The typical time-frames are Monthly, Weekly, Daily (D1), 4 hours (H4), 1 hour (H1), 30 minutes (30min), 15 minutes (15min), 5 minutes (5min) and 1 minute (1min).

The size of the time-frame determines the period for one candle. For example, one candle in the 4 hours time-frame contains all the price movements in that 4 hours period. A candlestick from the daily time-frame represents all time movement of that day.

Thus, 4 candles on the 15 minutes time-frame make up 1 candle of the 1 hour time-frame. And 4 of the candles on the 1 hour time-frame (or 8 candles of the 15 minutes time-frame) represent 1 candlestick on the 4 hours time-frame.

It is a myth that trading higher timeframes is easier. We have discussed the pros and cons of it previously.

Order Type

Market

Market orders are the typical orders most new traders use exclusively. When you click the ‘buy’ or ‘sell’ button in your trading platform, you place a market order and your trade is executed at the current best available price. Basically, a market order enables you to trade right away in that second you press the button.

Limit

Limit orders are set at a different price from the current available price. For example, Apple ($APPL) is currently listed at $128, but you want to buy it when it goes down to $125. So you have to place a limit buy order at $125 and once price goes down to $125, your order gets executed and you can buy APPL for $125. There are 4 different limit orders:

Buy Limit – Buying below current price

Sell Stop – Selling below current price

Sell limit – Selling above current price

Buy Stop – Buying above current price

Therefore, limit orders allow a trader to place a trade order at a specific price and does not require the trader to actively wait for price to get there.

Understand Your Trading Platform - The First Look At A Chart - (5)

Market vs. limit orders – click to enlarge

More concepts about executing trades and price information

Bid / Ask and Spread

The trading platform always shows two prices: bid and ask. The following points will explain the differences:

  • The bid price is always lower than the ask price
  • The bid price is the one you can sell the instrument for
  • The ask price is the price you can buy the instrument at
  • The difference between the two is the spread

Understand Your Trading Platform - The First Look At A Chart - (6)

Did you ever wonder why, when you enter a trade, the order is not at the level where your broker showed you the price before? That’s because of the difference between the bid and ask price. By default, most trading platforms show you only the bid price, but when you enter a buy trade, your order will be placed at a higher price, the ask price. The chart below shows you the difference, after enabling the visualization of the ask price as well.

Stop Loss

The stop loss order is among the most important concepts and we will talk about it in more detail later, but in its core, the stop loss is the order that will kick you out of your losing trade and close the position for you automatically when the trade goes against you.

A stop loss order enables you to pre-determine the size of your losses possible. And, even if you do not watch your trades at all times, a stop loss order makes sure that you will be out of your trade at a specific price level.

Note: In times of extreme price behavior, a stop loss order might be skipped and your losses can exceed the original planned amount. If you want to avoid such a scenario, you should look for a broker that offers guaranteed stop loss order execution.

Stop Loss order do not always work and sometimes, price can move past your stop.

Understand Your Trading Platform - The First Look At A Chart - (7)

Example of a stop loss order. It will close your trade once price reaches it – click to enlarge

Take Profit

The take profit order is the opposite of the stop loss. When price moves in your favor, your take profit order will automatically close your trade at a pre-determined price and realize the profits for you.

Understand Your Trading Platform - The First Look At A Chart - (2024)

FAQs

How to understand the chart in trade? ›

The data relayed from the candlestick includes the highs, lows, open and close prices. The 'hollow' and the 'coloured' portions are called the body. The long thin lines above and below the 'body' represent the high or low ranges and are also referred to as either shadows, wicks or tails.

How do you read a day trading chart for beginners? ›

Each trading day is represented as a bar on the chart with the open, high, low and closing prices. The length of the bar shows the stock's price range for that day, with the top of the bar representing the highest price and the bottom the lowest price for the trading day.

How do I start understanding trading? ›

  1. #1 Decide What Type of Trader You Want to Be.
  2. #2 Research Brokerages and Choose One Suitable for You.
  3. #3 Open a Brokerage Account and Fund it.
  4. #4 Research the Stocks You Want to Own.
  5. #5 Place Your Order to Buy or Sell Stocks.
  6. #6 Manage Risk.
  7. The Bottom Line.

What chart do most traders use? ›

Note: as candlestick charts are usually the default for traders, that's what we'll look at in this lesson, but you can identify these patterns with bar charts too.

Which chart is better for trading? ›

Candlestick charts are perhaps the most widely used among active traders. In some ways, candlestick charts blend the benefits of line and bar charts as they convey both time and impact value. Each candlestick represents a specific timeframe and displays opening, closing, high, and low prices.

Which chart pattern is best for trading? ›

The head and shoulders chart pattern and the triangle chart pattern are two of the most common patterns for forex traders. They occur more regularly than other patterns and provide a simple base to direct further analysis and decision-making.

What is the number one rule in day trading? ›

Win or lose, sell out. Most day traders make it a rule never to hold a losing position overnight in the hope that part or all of the losses can be recouped. For one thing, brokers have higher margin requirements for overnight trades, and that means additional capital is required. There's a good reason for that.

What is the formula for day trading? ›

Intraday Trading Formulae:

We need to add them up as: H + L + C = X Now, the derived value must be divided by 3: X/3 = P (which is called the pivot point) Then, multiply P with 2: X/3 X 2 = Y It is assumed that a stock moving above the pivot point is likely to continue its journey till the first resistance level.

What are the 10 best stocks to buy right now? ›

Sign up for Kiplinger's Free E-Newsletters
Company (ticker)Analysts' consensus recommendation scoreAnalysts' consensus recommendation
ServiceNow (NOW)1.49Strong Buy
Assurant (AIZ)1.50Strong Buy
Howmet Aerospace (HWM)1.50Strong Buy
Insulet (PODD)1.50Strong Buy
21 more rows

Which trading method is best for beginners? ›

Overview: Swing trading is an excellent starting point for beginners. It strikes a balance between the fast-paced day trading and long-term investing.

What are the golden rules of trading? ›

Key Rules from Iconic Traders

Cut your losses quickly: Never let a loss get out of control. Trade with the trend: Follow the market's direction. Do not trade every day: Only trade when the market conditions are favorable. Follow a trading plan: Stick to your strategy without deviating based on emotions.

What is the best platform to view trading charts? ›

The best free stock charts are on TradingView. Other free charting websites include StockCharts.com, FINVIZ, Stock Rover and Yahoo Finance. Traders can also open an account at many U.S. brokers for free and chart stocks, even with a zero balance.

What timeframe is best for day trading? ›

Summary Comparison for the Best Day Trading Time Frame
Trades Per 2 HoursDrain on Capital
1-Minute ChartMostHighest
5-Minute ChartFewerHigh
10/15 Minute ChartLeastLower

How do you read a trading bar chart? ›

A bar chart visually depicts the opening, high, low, and closing prices of an asset or security over a specified period of time. The vertical line on a price bar represents the high and low prices for the period. The left and right horizontal lines on each price bar represent the opening and closing prices.

How do you read an exchange chart? ›

With a chart, it is easy to identify and analyze a currency pair's movements, patterns, and tendencies. On the chart, the y-axis (vertical axis) represents the price scale and the x-axis (horizontal axis) represents the time scale. Prices are plotted from left to right across the x-axis.

How do you study a trading view chart? ›

Steps To Follow - 1- Open The Chart In DTF (Daily Time Frame) 2- Switch To Line Graph To Capture CLOSING PRICE Of Stock 3- Now Take Trend Line From Your TOOLS and Construct A Trend Line (Joinig the CLOSING PRICE of Stock) 4- After Constructing The Trend Line ( SEE ALL POSSIBLE CLOSSING PRICES IN THE CHART ) 5- Now ...

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