How To Read Stock Charts for Dummies

Chart Shark — Wed, 07 Oct 2009 01:34:46 +0000

You seem to think chart analysis is a lot more difficult than it really is. Instead of giving it a go on your own, you rely on the wisdom of us brilliant chartists to hand you money-making set-ups on your favorite stocks.

I am here to tell you, friend, that it’s not that difficult to do some basic technical analysis on your own. Let’s take a walk through the basics, shall we?

Connect the Pointy Bits

On a stock chart, you have peaks and troughs. In order to identify the trend of a stock, you simply find these peaks and troughs and connect them with a line. In order to make the chart fit your thesis, it is acceptable to plot the trend slightly below, or above the actual lows or highs. Whatever looks prettiest works best.

Color Within The Lines

Though you may take some liberty with the actual placement of the trend line, don’t go overboard. Stay on one side of the candlesticks. I realize it’s difficult to grasp at first because there are just so many pointy bits, but you will get it with some practice. I promise.

Adjust Accordingly

If you have publicly posited a thesis involving a current trend, and that trend is soon broken, you may feel slightly embarrassed. This is a rookie mistake. The pros know you can simply change the trend to fit the chart as it develops. Then you simply say that the trend has shifted. Place all blame on the stock or the market in general. The truth is, we’re all pretty much making this shit up as we go along.

Learn the Simple Chart Patterns

With a clever combination of a stock chart and your trend lines, you can even draw some really cool shapes. Above, you will see everything from simple geometric shapes, to male genitalia. These patterns are presumably to help us chartists trade better, but really we just think they look super awesome.

There you have it; Charting 101. It’s really not as hard as it looks. I have done the illustrations in the style of a 4 year old, because a 4 year old can do this. Go ahead, and give it a try. If you want a more serious walk through on some charting basics, check out how to read stock charts.

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A Trade in Tweets – RIMM Short

Chart Shark — Tue, 28 Jul 2009 14:00:29 +0000

I had quite a morning day trading today. The following is a transcript of my Tweets sent via Stocktwits as I traded RIMM. Since it all happens so fast, it is difficult to really give followers a picture of what I’m actually thinking, so below I’ve added what I was thinking at the time, and since I am not very smart, I have added what I assume a more prudent trader may have been thinking in the same situation.

The trading day started a little rough, and some guy prosed the following question;

9:44 am – “$SPY how do u day trade when no trend?”

To which I sarcastically replied:

9:44 am – @victorcharlie very carefully

What I was thinking – Hm… good question… today might suck…

Prudent trader’s thought – you day trade with a nimble mind, a sharp eye, and tight stops

9:46 am – $RIMM is running

Me – I’m going to catch a big fat piece of this run.

Prudent trader – If the stock market allows, I will take a calculated entry based on several well-honed criteria.

9:51 am – $RIMM @ resistance @ 78.13

Me – Yesssss, if this breaks, I’m in!

Prudent trader – Not yet… wait for it…

9:55 am – And now she’s dropping $RIMM

Me – WTF? This is BS. Good thing I didn’t enter.

Prudent trader – There was no way that run was going to continue. The tape knows all.

10:00 am – Looking to short $RIMM below 77.61…

Me – I’m going to make money day trading today if it kills me.

Prudent trader – Having witnessed previous resistance at this level, it has now set up as support and a break of this level may cause it to run down.

Full Time-Line of Trade Tweets

10:02 am – Hm… nevermind on the short with the $SPY acting behaving the way it is.

Me – What is going on with SPY? Is it drunk? Am I?

Prudent trade – Choppy day… There may be no day trading for me today…

10:04 am – $RIMM I lied, shorting w/ tight stop

Me – Fuck it, I’m in.

Prudent trader – “F” it, I’m in.

10:06 am – $RIMM Target at Friday’s high coming up…

Me – I’m getting some money out of this ASAP. Mmmm easy money.

Prudent trader – Previous day’s highs and lows often provide support/resistance. This is the first logical place to take some profit off of the table.

10:09 am – $RIMM took some profit @ 72.10, new stop at B/E.

(clearly I meant 76.10 here, but tweeting and day trading (day twading?) can be a pain in the ass)

Me – ka-ching!

Prudent trader – Nice trade according to plan, where’s my next target?

10:13 am - $RIMM approaching day’s lows.

Me – Woot!

Prudent trader – WTF does “Woot” mean?

10:15 am – $RIMM stop moved to 76.92.

Me – don’t want to lose my hard earned monies

Prudent trader – having previously had a difficult time churning through this level, it appears to be significant, and a break above will likely mean a short term reversal

10:32 am – While waiting for $RIMM to move, took a short in $AMZN, but stopped out for a loss. Looking to short $AAPL below the dollar mark.

Me – Woops. F AMZN. Dicks.

Prudent trader – AMZN appeared to be dropping with the market. Oh well, now we know otherwise. AAPL appears weak though, and may drop here…

10:35 am PS Raaaar I’m a bear. Right now… A shark in bear’s clothing.

Me – I’m hilarious

Prudent trader – The market may be starting a downward trend here. I am short on the market until it proves otherwise.

10:37 am – And for those of you who love dead whales (you know who you are) – http://su.pr/2jFWwI

Me – Omnomnom

Prudent trader – Sharks love the occasional dead whale for dinner. Observe:

10:38 am – Short $AAPL… stop above the dollar

Me – Finally, I knew it.

Prudent trader – That was a well taken entry. I will keep a close stop on this one since the market still seems tentative.

10:42 am – Still short on $RIMM, just got in on $AAPL – going to let these one’s run with the market for now.

Me – Oh yeah, we’re going down today.

Prudent trader – It seems the market may be setting up to trend down today.

10:59 am – Out of $AAPL @ B/E. Looking to get out of $RIMM above 76.25.

Me – Shit shit shit. WTF happened?

Prudent trader – It appears the market is either reversing or its going to be a choppy day. Watching closely…

10:59 am – Out of $RIMM

Me – Screw this, I’m going to go play Xbox.

Prudent trader – 1 winner, 1 loser, and 1 B/E; not a bad bit of day trading for such a horrible trading day I think I am out for today. One of my day trading secrets is that 1 big win is a good day.