Education

Education • August 27

Building an AAPL daily chart

Volume Price Analysis (VPA) is the study of volume and candles alone. Naked charting simplifies the perspective and ends reliance on indicators. Technical indicators (like moving averages) are equations of historical prices – lagging tools by design. VPA is the identification of specific candle types and patterns paired with significant volume. Finding confluence with levels across multiple timeframes (hours, days, weeks) makes a blank chart easier to read, and can help identify supply and demand levels (the king of charting and trading).
Check the prior posts to see the levels I’ve drawn using VPA over time. It’s a practice you don’t perfect, but I enjoy learning.

Volume Profiles show volume by price (y axis) across a specified timeframe, whereas most are used to seeing volume displayed by time (x axis). It is helpful to gauge “where the bodies lie,” or where significant volume has traded. It is also VPA appropriate 🙂 I don’t know how I’ve ever looked at charts without them.
  • Volume Point of Control (VPOC) – highest volume bar in the histogram
  • Value Area – 70% of the volume within the histogram, bracketed by the:
    • Value Area High (VAH) & Value Area Low (VAL)

Moving Averages are lines averaging prior ranges of prices, smoothing the price volatility. Two types:
  • Simple (SMA) – average price of timeframe specified
  • Exponential (EMA) – a higher weight of recent prices calculating the average

One could argue both, either, or neither SMA/EMA levels are valid. The 200 day SMA (mean of the last 200 days) is a highly psychological long term trend commonly discussed in financial press. My favorite EMAs are the 9 & 20. I like shading between the EMA spread, creating clouds – a visual tool that slaps you in the face with a trend.

Fibonaccis are a set of ratios based on the numerical sequence. Named after the Italian mathematician who brought the ancient Indian study home, fibs [as they’re called] are an incredible tool. I plan to opine on the subject in another post.

(slide picture left to right)

Putting it all together looks kind of busy, right? Or does it add context? Using only a few tools helps to filter out the noise. That’s why I like to have my annotation color settings in higher transparency. Otherwise, it’s best to just do it naked. Always good advice.

by Nick