FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 31 March 2016

You Have The Map, Do You Know How To Read It?

by Sam Seiden, Online Trading Academy

Online Trading Academy Article of the Week

I remember when I was a kid, people still used paper maps. Remember the folded paper map in everyone's glove compartment? Having to look at it at every stop light? Yes, for those of you under 30 years old, there was such a thing as paper maps and yes, it's much easier today.

As a kid sitting in the back seat, still a few years away from hand held gaming and smart phones, I was a little bored at the time. With the maps, I used to imagine what they would look like if the streets weren't labeled. Now look at the stock chart below, not all that different.

This is a chart from our Daily Market Overview service that goes out to our members each day, showing the NASDAQ moving from demand to supply and back again. To make chart reading easy in my articles, I label them so that you can learn from them, but well before any labels are on the chart and long before the trades are taken, it's a blank chart/map with no street signs helping you decide what to do.

1/27/16 - Daily Market Overview

Stock chart reading is an essential skill for traders.

The yellow shaded boxes are the supply and demand levels we found for our members, demand on bottom and supply on top. Without the labels on the stock chart, would you be able to identify those turning points?

Let me walk you through so you not only have the map, but also understand how to read charts without labels. In each yellow shaded area price moved away from that level in strong fashion. Price also spent very little time at those levels. These two factors, along with the specific pattern itself, tell us there is a major supply and demand imbalance at those levels. This exists because banks (smart money) are buying and selling at those levels.

What about the shaded grey area in the middle? Many will look at that area and think that because of all the trading activity there must be strong supply and demand. Actually, the opposite is true... The fact that so much trading activity took place and in such a big range tells us there can't be a significant supply and demand imbalance in that area. If there was, price would spend a very short period of time at the level and move away in strong fashion. The price action in the grey area actually tells us that the buy and sell orders in that area are filled, meaning price should move quickly through that area in the future, like it does.

So, the opportunity was that we had a strong fresh supply and demand level with a very large profit zone between them (thanks to the price action in the grey area).

It all comes down to understanding that the movement in price in any and all markets is always a function of pure supply and demand. The key is to know what this looks like on a price chart and executing your rule based strategy without thinking and emotion. Another way to say this is to know how to spot key pockets of "unfilled orders" (yellow boxes) on a stock chart. When you can do this, that means you can also spot the profit zones where the orders are "filled" (grey area).

Price charts are just another map, evolving from paper to the screens just like the old paper road map and today's GPS. If you don't know how to read the map, be careful putting your money at risk because there are very good map readers that will be happy to take your hard earned money.

Hope this was helpful, have a great day.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Investing Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

You can also comment using Facebook directly using he comment block below.

Econintersect Investing


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
Run A High Pressure Economy? Janet Yellen Does Not Understand the Problem
Comments on Feyerabend’s ‘Against Method’, Part III
News Blog
How Miller Stacks Up Against His Draft Class
Inside The Machine: How Two Nobel Winners Taught Us How Companies Tick
Healthcare's Dirty Little Secret: Results From Many Clinical Trials Are Unreliable
The Cleveland Indian's Unique Use Of Andrew Miller
What We Read Today 26 October 2016
Why Do So Many Price Tags End In .99
September 2016 New Home Sales Improve.
Higher GDP Growth In The Long Run Requires Higher Productivity Growth
Quantum Encryption Is Secure Because Information Encoded In A Quantum Particle Is Destroyed As Soon As It Is Measured
The Stock Market Is Up, But Mutual Fund Investors Are Fleeing
Infographic Of The Day: Google's Hidden Games
Early Headlines: Asia Srocks Mostly Lower, Energy HY Bonds Surge, Google Fiber Cutback, Shadow Banks Dominate Mortgages, NATO Crowds Russia, Coffee Surges And More
Top 10 American Misconceptions about China (Version 3)
Investing Blog
Thirsty For Income? How To Thrive In This Yield Desert
Apple's First Annual Sales Decline In 15 Years
Opinion Blog
A Hard Brexit And Reduced Migration Won't Benefit UK Workers
What Triggers Collapse?
Precious Metals Blog
Inflation Surging As Platinum Signals Stock Market Decline
Live Markets
26Oct2016 Market Close: US Markets Close Lower, Boeing Shares Up, Texas Tea Stabilizes In Low 49's, Gold Falls To 1266, Friday's Fed Rate Change Promises To Be A Game Changer
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

Crowdfunding ....



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved