The one that shows the most volume? The one with the strongest price action? The one with the highest trading volume? The one that displays the most liquid market? Which chart is easiest to read? Which chart is the least complex?
Traders need to understand this complexity, it’s why we have charts. We all have the same interest and need to share that with each other to create a better market. Understanding the chart is an important starting point to making a trading decision as quickly as possible.
Here are some helpful points for understanding the structure of a chart:
The chart is divided into 2 main parts – High level and Low level:
High level includes the most important signals and information, it is not important for beginners.
The Low level include the less important signals and information, it is important for experienced traders.
A chart is always shown as a 3-D representation. The charter first creates a set of data based on the input data (e.g. Price/Transaction, price, volume)
Once this data has been added, the chart is divided into different zones which are then plotted around the points:
High Level is where the most important data occurs (e.g. Price) : This is where the data is displayed and the order is created. It is also where the order is placed and executed. It helps traders make decisions about how to execute their orders. On the chart, the “Order Weight” is expressed as the number of points the chart will update when an order is placed. This is important, as it gives you an idea on how quickly prices are changing.
Low Level is where the less important data occurs, it is also the place where your order is displayed. The price is usually on the left-hand side, so it is the spot where you can quickly compare your orders and understand how fast they are moving.
Zones are made up of the 3 data regions:
Trader data (Orders received, Price, Volume and Trades): This is the first stage of the chart. It displays what each of your market orders will look like in the chart. You can find different order settings (including price, rate, size, frequency, expiration) on the chart.
The Order Weight is the number of points the chart will update when an order is placed. This is important, as it gives you an idea on how quickly Prices are changing.
The Price is located at the bottom
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