📈 Charting Lesson: What do I even look for in a chart?!

Full-time trader here. Sharing some knowledge for free. If this helps you, show some love: follow me for more and like this idea. 👍

Why do I need a chart anyway?
First, we need to convince you of why you need a chart. No problem. Let's say you're a fundamental analysis investor. The stock has to make sense. The stock has to last forever. It needs to be a growth stock. Let's say... AAPL GOOG NVDA TSLA is a good example over the last few years. Now that you found a good candidate, when are you going to buy? At an all-time high? At an all-time low? One share a day? One share a week? No. Buying a stock without looking at the chart is like driving with a blindfold. Don't do it.

1. Pull up a chart.
   
2. Observe past price action.
   
3. Try to find a trend.
   
4. Plan your entry.
   
5. Do this even if you're going to hold for 20 years.
   

When I pull up a chart, what do I look for? I just see a bunch of lines.
Let's first make sure you are looking at the correct view. On the top left corner of your screen, you'll see your user icon. Next to it is the ticker. Next to it is the interval. Next to THAT is the chart type. Make sure you select "CANDLES". Not "hollow candles". Here's how it should look:

Mine may look a bit different because I changed my theme. But the candles is what we care about.

Now the juicy part.

Support and Resistance are Key Reversal Levels.

1. When you open a chart, the first thing you want to do is look for areas where the price has reached in the past and reversed or got rejected or bounced. For example, every time SPY reached 443.37 in the chart above, it reversed. Let's call this a, "key level".
   
2. If the price is ABOVE that key level, the line is called SUPPORT.
   
3. If the price is BELOW that key level, the line is called RESISTANCE.
   
4. Using the horizontal line tool, make sure you have these key support and resistance levels on your chart. Try to ONLY buy near support and sell near resistance.
   
5. If the stock is choppy, do your best. If you can't, skip it and go to another stock. There's thousands!
   

Stocks, Currencies, and Cryptos Move in Trends. Up or Down.

1. Next, try to find a "trend". A trend is something where if you connect the dots, the price jumps right from that straight line.
   
2. Pull out your trendline tool and try to connect some dots. Don't go through any candle bodies. Going through wicks is okay. It's actually recommended.
   
3. Three touches are required to make a valid trendline. If you see only TWO touches? Is the price going TOWARDS the trendline if you were to extend it? There's a good chance it's going to head towards that TL and bounce! Good job. You found a good trade potential.
   

Identify Reversal or Continuation Patterns.

1. Look for known patterns. In the example above, there is a "head and shoulders" pattern. This is a bearish reversal pattern.
   
2. Know that not all patterns will come true.
   
3. It's good to know the overall signal the market is giving.
   
4. If every trader sees it, it's likely not going to happen.
   
5. In the above example, a looming H/S pattern is scary given already bad economic conditions and recession/ inflation worries. In this case, the market may be trying to tell you something.
   
6. Understand that these patterns are not just nice-looking drawings on a chart. They work because they display some sort of buyer/ seller psychology.
   
7. I will post more examples of known patterns on my TradingView profile soon. Be sure to follow if you want to learn more.
   

If you benefitted from this, you are welcome to follow me, comment any questions, or share this with your friends. Good knowledge should be free. I'll post more insight soon. Thank you for reading and for your continued support. 👍

Comment:

If you saw this chart, you saw I was calling out a bearish H/S on SPY QQQ - both are down BIG since then.