Chapter 6
Reading Basic Bars: Showing How Security Prices Move
In This Chapter
Seeing information graphically
Interpreting feelings from a dot, a bar, and a line
Identifying trends 101
When you start looking at charts, you may see what looks like a bunch of unrelated dots. It may take a little practice to see, but inside each dot on the chart lies a world of information. The “dot” is really a price bar, which graphically represents all the transactions done in the security, revealing supply and demand at each point.
In this chapter, I define each component of the price bar. I demonstrate how to transform the numbers on the price bar from abstract dollar amounts into the market sentiment of the participants in that security, either optimistic or pessimistic. You know the phrase “Actions speak louder than words”? Reading price bars is the perfect application of that saying. Traders may say that they feel optimistic about the price of the security going up, but the price bar tells you what they really think by showing you what action they took. Reading price bars is about being a detective examining the hard evidence — and disregarding witness accounts.
Building Basic Bars
The price bar is the basic building block of technical analysis. After you have a grip on the price bar, almost nothing in technical analysis can confuse you for long. Honest. Resist the temptation to skim over the bar chart material to get to the more glamorous-sounding techniques. You can’t grasp the principle ...
