Short term traders need to evaluate information in a different way than investors do. The best traders need to take into account all of the things that investors look at, but they also need to look at the tiny changes that happen on a day to day basis. Many short term changes occur based completely upon trader psychology, and as a result of this fact, many of the tiny changes can often be anticipated and accounted for. The best traders are able to translate this into consistent profits, even over the short term. It can be difficult once in a while, but it is worth it to most.
One of the ways that traders predict movement is with the use of charts. There are a few types of charts out there, but for the short term, candlestick charts are best because they show so much info in a small space. Most sites use line charts as their default, and these are fine for a quick glance if you aren’t concern about changes within the day or even week, but when you have trades that you will be opening and closing over the course of a week, you need to go into more depth than a line alone can provide.
The candlestick chart is so powerful because it shows an asset’s opening and closing prices, the daily high and low, as well as the direction, which is usually color coded for quick reference. When you group a set of candlesticks together on a chart, you can get a snapshot of an asset’s movement over a period of time. Over the few centuries since this charting method was created, some patterns have evolved that are fairly reliable when it comes to what will happen in the near future. Knowing these can give you a big advantage. Really, this is also a psychological effect, but because so many people expect things to happen, they do because people act in a way which makes them. Becoming aware of this will give you an ability to make money where some others do not.
The thing to be aware of is that the timeframes don’t always work out like they are expected. If you are looking at 5 minute intervals on a chart, you might expect a signal to mean that the change you expect will happen in the next five minute chunk of time. It might happen sometimes, but it might take more than 5 minutes to get there, too. Some types of trading are more conducive to this fact than others. Forex traders tend to use candlesticks the most, and this is fine because Forex traders have open trades most of the time. Their trades don’t close based upon an expiry. This is what happens with binary options, though, and a lot of former Forex traders run into issues when they make this transition. If you can account for this, you will find a greater degree of success. One easy way is to not start out with ultra short timeframes in the binary department, like the 30 and 60 second trades.
Getting the Most Out of Your Charts
The best way to use charts is to get a package that updates in real time, and allows you to open up multiple charts for the same asset. This way, you can look at different lengths of time for your candlesticks and evaluate a potential trade more thoroughly. It can be time consuming to learn this at first, but once you become efficient at reading charts, you will find that the extra information that you are giving yourself is only going to help you, especially once you discover which indicators complement your trading style best. Finally, also look for a charting package that has the ability to overlay a few different indicators on the same chart. You will want to experiment with these until you find a winning combination.