HomeBlogInvestment-articlesTrading Charts and the Financial Markets: Why One Size Does Not Fit All

Trading Charts and the Financial Markets: Why One Size Does Not Fit All

Despite the ever growing complexity that surrounds the financial markets, a surprising number of traders still fail to recognize the subtle differences between individual platforms and products. One of the most important facts you will ever learn about financial trading is that not all markets have been created equal, with the result that each boast their own unique levels of risk, reward, liquidity and leverage. This is an extremely important consideration, as it dictates that your trading strategy and the trading charts that you use must be compatible with the market that operate within.

The Different Types of Trading Charts and Their Relevance to the Financial Markets

With this in mind, it is worth noting that there are many different trading charts available to suit various financial markets and derivatives. On a fundamental level, these charts can be separated into two distinct categories, so that traders can choose between those that are based on time frames and those that are not. In terms of the second category, graphical charts can be founded on items of criteria such as trading volume and price ranges, which deliver an entirely different data set to investors according to their individual settings or trading style type.

Some types of chart automatically lend themselves to specific markets, simply because of their nature and the data that they deliver. Take time frame charts, for example, which include everything from 30 second graphics to those that deliver monthly figures and images. These are ideal for forex traders and individuals who operate in similarly volatile markets, as the option to access real time and recent data is crucial to making profitable transactions amid constant price movements. This is only a basic rule, however, as other factors can also influence the relevance of specific trading charts and whether they are right for you.

Your individual philosophy and operating strategy as a trader is also critically important when selecting a particular type of chart, and experienced investors will often base this decision entirely on their own ethos. For a knowledgeable trader who prefers to execute a high volume of transactions during a single day, for example, the choice of short time frame charts is likely to be preferred. Conversely, more selective investors who favor a lower volume of orders will instead choose a longer time frame, or select a trading chart based on price ranges.

The Last Word in Trading Chart Selection

The attitude of experienced traders offers an invaluable lesson for novice investors, especially terms of their approach to the market and its fundamental dynamics. These individuals understand that in basic terms, the core dynamics and laws that determine a specific financial market remain the same across every conceivable time frame. This outlook requires a certain level of determinism, while it may even dictate that numerous time frames are used across both short and long term trades.

In short, it teaches inexperienced traders that their core philosophy is crucial to the choices that they make, especially when it comes to selecting a trading chart to help them achieve long term profitability. In fact, the same principle can be applied to use of market bulletins and announcements to influence your trading strategy and individual transactions, as though this can be the information delivered can be insightful it must not override your instinct and underlying philosophy as an investor.