Textbook Trading – Notes and Review of Chapter 3 – Charting & TA by @investorslive

Table of contents:


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Another solid setup chapter, big goals here are to describe the idea of supply and demand and how it translates to charts. Often I think a lot of guys do technical analysis but seldom do the back out and think about why certain price levels are support and resistance. Nate does a solid job of getting you to think about the mindset of other traders. I’ll admit I often neglect this, I focus in so tightly on tick by tick and my own thinking that I seldom step back and say “What is the crowd thinking here?”


Second segment is a quick but helpful reminder of the basics of candlestick charts. If you are new to candlesticks this can be very helpful. While a line chart can show the same thing as a candlestick, I think as a “real” trader you need to understand and use candlesticks. 99.99% of other traders are using them, you need to be looking at the same info as them. Thankfully unlike most trading books Nate does not spend an hour or 100’s of pages going into all the superstitious candlestick patterns. He leaves that for the loons. He simply describes how they work and the basics of how to read them.


Last sections focus on “Former Runners” and “Magnets”. These are often misunderstood terms and there is a solid description of each. Often in chat you will read “xxx former runner” and so many think there is some sort of central database to tap into. Really you need to know what a former runner is, but to know which tickers are one takes experience and mental work. Concept of “magnets” is more basic technical analysis. If you are trading momentum stocks, which is what the IU trading community does, you need to be looking at key inflection points. And those are often centered around whole and half dollar amounts as well as support and resistance levels.


While I don’t know if I learned anything new in my second viewing of this chapter, it was enjoyable and interesting. I also feel like I was reminded of some key concepts that I may have backburnered over the last year. Particularly thinking actively about supply and demand on a chart.


Good Supply and demand discussion – detailing the concept of bid/ask
-Buyers trying to find sellers vs. sellers trying to find buyers
Consolidation description – support and resistance
Useful illustrations of breakouts and breakdowns
“Left side of chart helps tell the story of the right side of the chart”
Basic candlesticks descriptions
Nasdaq’s vs OTC
Multiple time frames – MTF – lining up daily and intraday
-3 and 6 month – support and resistance levels
-line up on 1min
DAS charts very dark.
Former runners – description
-history of big moves in the past
-history of big range
-pennystocks vs boring stocks like MSFT GM etc
-Sector stocks often, they run when better peers run
-need to find these on your own with experience. -chat useful for this
-watching HOD list for these former runners
-big volume and big price moves, this will often run again the future once they put in these big moves
Two plans
-week opens
-big gap ups
Focus on whole and 1/2 dollar marks
Focus on entries – anticipate moves
-Whole and 1/2 dollar
-G/R, R/G
-Daily support and resistance
-trade around points that are interesting “good analogy about people attending a concert”

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