Day trading a live chart is for experienced and prepared players. The first step is to master yesterday's chart using a methodology to do so. Only when that's in place it is time to start mastering today's chart. Generally, the market will go sideways, up or down, either in a trend or in a trading range. A sample thought process then would be to first establish what condition the market is in and how you're going to exploit that. Let's say the market is in a trend. Do you buy right now? If the trend is strong and you have reason to believe it will continue the answer may be yes. Or do you wait for a pullback? If so, you wait. Beyond that it's always helpful to plan and prepare for multiple scenarios. If your methodology gives high probability of Up, you still need to plan and be prepared for how to act if the actual outcome is Down.
I agree with several posters above who said that you need to know what to look for ahead of time: aka letting the trade come to you. A simple example would be: If we open above yesterday’s high and the price pulls back to yesterday high, I will go long risking half of yesterday’s ATR. These plays can be put together in a playbook (credit to SMB)
First of all, charts are a way to organize price action. That's it. They are one piece of the puzzle. There is no way you can trade profitably with charts alone. You need market knowledge in order to predict other players actions or you need statistics that give you an edge regarding pricing (i.e. at the end of the quarter/year, funds start window dressing, thus realized vol is higher than it is priced into options) or you need flow information that nobody else can see (because you work at an internalizer). Position management is 80% of the game and the edge comes with the entry. correct prediction is 20% of the game. You rather want to be wrong and get out at a small gain because you were able to frontrun an order than make a little bit of money because your prediction was correct but your entry was shit. Charts are ok (for some people) but you have to focus on your niche and gain additional knowledge
TheMickey is a substantial poster. Apologize. Other than static or a 60 HZ tone most of the time, my thought process when looking at charts on a intraday or swing time frame is based on “Convergence of time frames”, momentum, support/resistance areas for targets and stops, and the count. “The count” can be used as a time delay before taking action for some setups. Support/Resistance areas are defined by me either by the high/low of the weekly, daily, or a moving average depending on my time frame. This is for stops and targets, among other purposes. Momentum is used as a trigger to enter or exit certain setups or positions. I use other methodologies as entry and exit “Triggers” as well. For intraday trend following trades or option position hedges, I consider VWAP as an important intraday indicator.
Answering the question "Please share your thought process when you are looking at charts" Top down analysis, going from what's happing on the weekly charts down to 15m to identify the trend then refining to a lower timeframe for a precise entry with a tight stop loss Now for entering a trade, i have a solid trade plan which tells me when to take a trade and when to stay out of it. the data i have from live testing as well as backtesting, gives me a window to trade in ( 3 to 4 hours) and outside that i don't even open charts So to what you said, the one solution is make a trade plan with solid data and then the losses are just the cost of business
when you first start trading its hard to read the chart. one thing is clear for us all is that after the fact and the chart pattern has formed, its really easy to see the pattern and what you should have done. when i started trading, i started out looking at historical charts where i could see everything that i needed to see. over time i could see market context, chart patterns, potential entry points, and possible trade management scenarios. but keep in mind that when trading in real time all you will be able to see is chart patterns forming, for me that was the hard part. market context is what is going on in the market in general and what is happening with what ever you are trading. chart patterns can be anything you want. personally, i trade futures, not stocks, so i look for trends, the 3 setups i look for are pullback, range break and fast price action moves. once i see a setup forming, i look for potential entry points. there can be one or more entry points depending on your risk tolerance. the last piece is trade management and you have to find a trade management process that fits your personal risk tolerance. hope that helps toucan
easier way is to output the numbers (metrics) from the chart and determine actions based on there levels. could be done in excel. unless your process is just gut feel
Okay I give mute9003,whats the reason you want to "learn to read charts better"? What's the endgame? You just want to learn to read charts better for the sake of learning to read charts better? Never making a trade,never entering the market ever,never placing a bet long or short? Just observing the market for the rest of eternity?
Do you honestly believe that? I agree with the rest you said and how there's much other valuable 'stuff' to consider, but I hold a different opinion in that I believe there are traders who are profitable with charts/levels alone. We can drop the discussion of course - but I'm curious if this is your actual belief.