LESSON 1 : Introduction To Trading
------------------------- Part 2 of 4 - Charts -------------------------
Here we look at the basics of how candles work - this will be the foundation of how we look at charts throughout the course.
Each candle shows us some vital information about how the price has moved, which in turn will eventually allow us to make our predictions of what will happen next.
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Here’s our first example – and what we're looking at is the Euro against the US Dollar – so essentially this is the exchange rate. And here - each individual candle shows us what happened on a single trading day.
Everything together here - shows us what the price has done over the last 6 months - from November to April.
And obviously we read the chart from left to right - just like how you might read a book.
The latest price is over to the far-right hand side of the screen. So in this example – that would be around 1.205.
Looking at this chart - we can see the lowest price was around 1.16 in November. And the highest price was 1.235 at the beginning of January…
Now because each candle represents 1 day here – this would be called the daily chart. A lot of people confuse this where they think a daily chart means the whole thing from left to right – but it’s not – the daily chart means each individual candle represents just 1 day.
And what we can actually do – is we can control how long a period of time - each candle represents.
So here’s Eurodollar again - but now we’re looking at the hourly chart - because each candle is now showing 1 hour of price action.
And in total from left to right - we’re now seeing what’s happened over the last week.
This is Eurodollar again - but now the 1-minute chart – so a really short timeframe here. And now we’re seeing just the last couple of hours.
So with the same financial product – we can zoom in and out - on the price action - using all of these different timeframes…
Here’s another product – and this is the S&P 500. Now what this shows - is a collective basket of the top 500 shares in the US.
Generally speaking the S&P is seen as a benchmark - for seeing if the economy is in a good or a bad place. And this one in particular is the weekly chart – so it’s a real long-term view that we have here over the last 3 or 4 years.
And it’s quite interesting but you can see this big downwards blip in the beginning of 2020 – that was obviously when covid was first being discovered - and it quite clearly hit the markets hard...
So all these economic cycles – of booms and recessions and everything inbetween – all of that can be seen in our charts…