how to use line charts to identify levels

CHAPTER 4 :TECHNICAL ANALYSIS: CHARTISM AND PRICE ACTION

We use a system based on technical analysis. We try to get the trend direction from the fundamental aspect and we simply sell in supply levels in downtrend structure and we buy in demand levels in uptrend structure. We might explain basics things at first but we need to get sure you get a strong foundation before explaining the next concepts.

HOW TO USE LINE CHARTS TO IDENTIFY LEVELS

A great advantage of the line graph is that it allows us to identify the supports and resistances in a simple and efficient way. Moreover, it allows us to more easily identify trends and key points.

The line chart reflects the final price at the correct time.

The advantage of using a chart that is based on the closing price in a temporality is that we just know exactly who won the "final" battle between buyers and sellers.

In the picture below, we see a line graph in a 4 hours of time frame where the price has reacted to key areas at key levels. These areas are called support and resistance. From time to time, it is very convenient to use the line chart to facilitate the vision of the key points and supports and resistances.

The only thing you have to do is use a straight line and try to find points of contact where the price has reacted several times in the past.

In this chart, the blue line was made with the closing price of every 4 hours.

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