Charts can provide plenty of profitable trading patterns time and again.
But they can also be deceiving.
That’s because most charts don’t share key data. It can tell you a price point on a given day—which is handy. But there’s more to a price chart than price.
For instance, if a stock keeps moving higher day after day, it may look like a good trade. But if it’s bouncing around during trading hours and only barely heading higher, it may not look like the slam dunk that it could be.
To find these extreme intra-day moves, and to get an idea of where the bulk of the trading money is going on a daily basis in a stock, a line chart just won’t cut it.
That’s where candlestick charts come in. They show where most of the money in a trade is going throughout the day. And it can show how volatile a stock has been moving—giving more critical data for making short-term trades.
Best of all, however, is the fact that candlestick charts also show another type of pattern in the markets. These patterns, called gap patterns, can indicate when big money is making a move. Understanding these moves provides more short-term trading opportunities than just following a line on a chart.