A Practical Guide To Marking Up Your Charts Everyday

In this practical guide to doing technical analysis, we’re going to cover everything you need to get yourself and your charts ready for the trading session. It doesn’t matter what instruments you trade, this is an essential task you need to complete before placing orders in your trading terminal, otherwise, you risk entering invalid setups and are likely just gambling within the market!

Check out our in-depth YouTube video where I go over how I analyze the markets every morning before the New York session!

A Process For Analyzing Each Time Frame

What we’re going to cover in this guide are all the essential pieces to analyzing the markets like a professional supply and demand trader. No sub-task should be rushed, glossed over, or skipped if you want to ensure a thorough analysis of the trading instrument(s) in front of you.

1. Market Structure

Market structure describes how prices change over time in a market. It is essential to understand market structure because it enables you to spot trends, points of supply and demand, and potential areas in which price might reverse. Price action analysis, which examines candlestick patterns and chart formations, is one method for examining market structure.

At Phantom Trading, however, we are intraday traders for the most part which means we like analyzing market structure by looking at swing points (highs and lows) to get a sense of market direction based on the trend or range that we’re in. The core timeframes we look at are the Daily, 4H, and 15M timeframes to determine our swing structure, then we’ll look at the internal structure to determine our orderflow and get a sense of the potential short-term direction of the market for the session that we’re trading.

2. Supply & Demand Zones

Areas on a chart where buying or selling pressure has caused the price to stall or reverse are known as supply and demand zones. These areas typically take the form of a candle, or range of candles. These zones can be used as higher timeframe POIs, which we’ll cover in more detail later in this article, or they can be used to help you identify potential entry and exit points for trades on their own. Look for areas where price has historically reversed, bounced off of a chain of supply and demand, or swept significant liquidity to identify supply and demand zones.

Practicing marking out and understanding the wide range of supply and demand zone types, including supply and demand flip zones is a key part of analysis. As a trader, it’s instrumental to your success that you’re able to read and identify these zones with good accuracy so you’re trading off levels that have a good probability of creating a reaction that you can profit off of.

3. Liquidity

Liquidity in the traditional sense refers to the ease of executing a trade in a market without materially affecting the price. A market with high liquidity has a large number of buyers and sellers, which facilitates swift and effective trade execution. Liquidity levels should be taken into consideration when examining forex charts, as low liquidity can result in wider bid-ask spreads and slippage.

As a supply and demand trader, liquidity refers to price points and ranges in which there are large collections of orders sitting (also known as resting liquidity) that will either be used to fuel a move in a market, or which is simply there to help institutions build a position by manipulating price, filling their orders at a better price, then pushing price in the opposite direction to profit from the position they’ve filled by hunting the stops of weak handed traders.

4. Points of Interest (POIs)

Areas on a chart where significant price action has taken place are known as points of interest, or POIs. These can include prior support and resistance levels, trendlines, and moving averages, but in our case, as we’ve already mentioned, we’re looking for supply and demand zones. You can take advantage of high-probability trade setups by identifying high-probability POIs and gaining a better understanding of where the market is most likely to react from there!

5. Set Alerts & Look For High Probability Setups

You can keep a pulse on the markets and spot potential trading opportunities by setting alerts. For instance, you can configure alerts for price levels swept as liquidity, or when a supply or demand zone you’re looking to trade off of gets hit. It’s crucial to evaluate potential setups’ chances of success after you’ve identified potential ones.

Once price has set up after hitting or sweeping a high probability level of supply or demand and triggers your alert, it’s game time. Start looking for a trade setup and be ready to execute an order when all the conditions in your plan are met!

Analyzing The Markets in Conclusion

In conclusion, professional traders tend to focus on key factors like market structure, supply and demand zones, liquidity, POIs, and high probability setups when analyzing forex charts, and if you want to become proficient at analyzing the charts like a pro supply and demand trader, you have to be able to analyze the charts accurately and consistently. You can improve your ability to spot trading opportunities and make wise trading decisions by becoming an expert in these areas by joining a trading course like Phantom Trading

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Robert Castillo
FX Trader & Analyst
Writer & Editor

Rob is a funded trader from Toronto, Canada, and has been trading currencies, commodities, stocks, and cryptocurrencies for over 7 years. Outside of trading he enjoys making music, boxing, and riding his motorcycle.