Know about price movement waves! ~ How to read charts part ② ~ Technical Analysis Basics Course #4
Hello! This is SAKU!
Continuing from last time, this time as well we will talk about how to read the chart!
Last articleWe explained how to read candlesticks, but nowlet's look at the price movement wave formed by consecutive candlesticks!
Price movement forms a wave
On actual charts, price movement is not a one-way straight line; candlesticks of various shapes go up and down,and the price movement is represented in a jagged, wave-like shape。
Riding this wave of price movement well is not an exaggeration to say that it is how you make profits in trading.
Why does price movement form waves?
You can understand that price movement forms waves, but thenwhy does the market form waves in price movement?
Pop-pop-pop...
Ding!
The answer is simple: the market haspeople who sell and people who buy, you see.
If there are more buyers, prices rise; if there are more sellers, they fall.
Thus,the tug-of-war between sellers and buyersshapes the wave of price movement.
It may seem simple, but reading the power dynamics of buying and selling from the price movement wave is extremely important in technical analysis.
Now that you understand that price movement forms waves and the reason why, let's actually practice drawing waves on a chart to visualize it more clearly!
First, please look at this chart.
When you draw a wave on this chart, it looks like this.
How about it? By drawing a wave on the actual chart, doesn't price movement seem easier to grasp?
It may seem easy, but in practice it is quite challenging until you get used to it...
However, being able toperceive the waves with a consistent standard and intentionis an essential skill in discretionary trading, so please practice it extensively on your own!
By the way, I typically draw waves by connecting the shadows (wicks) of candlesticks!
Key points in drawing waves
・First, practice drawing waves at a constant interval!
If you draw in uneven ways, sometimes large waves and sometimes small waves, your eye moves around and you cannot perform consistent analysis. Start by practicing drawing waves on many different charts until you can establish your own scale or standard for waves!
・Yet, recognizing waves is quite subjective
Wave recognition involves a lot of subjectivity and varies from person to person, sothere is no absolutely correct way to draw them.
It is normal if you don’t do well at first, so practice a lot and aim to develop your own sense.
・Ignore excessively long wicks
As in the chart example earlier, you may see some wicks that extend far, right?
I ignore these overly long wicks when drawing the wave.
・Re-drawing the wave on the same chart as before can be effective
If after some time you redraw a previously drawn chart and the wave looks different, the wave-drawing standard may still be unclear.
Keep practicing until you can draw waves consistently!
This wave-drawing is a basic part of technical analysis, but because it can influence the content and judgments of chart analysis, it is extremely important, so before diving into specific technical analysis methods, make sure you can grasp and perceive the price movement waves well!
There are several ways to draw waves: print the chart and draw by hand, capture the chart and draw with a drawing tool, or use a tool (indicator) that draws lines continuously.
Try out which method suits you best and practice!
In conclusion
In the previous and this article, we’ve discussed the basics of chart readingcandlesticks and waves of price movement!
It’s a very basic part, but rather than finishing quickly, we’ve chosen to dig into and explain it over separate articles, because that aloneis important, so make sure you practice repeatedly until you can instantly picture the information of candlesticks and the waves in your head—without neglect!
Next time, we will discuss a super important topic in technical analysis“Dow Theory”!
For details on the author's trading method, see below ↓
MTF Multi-Time Frame Analysis Essentials(Discount campaign through August 31, 2026, 23:59!)