Many traders don’t even realize they’re making one fatal mistake before they even start clicking around on their trading platform.
They’ll spend hours studying patterns, watching news alerts, and tracking indicators…
But they completely miss one key piece of the puzzle.
And speaking of mistakes, if you’re not already using my Monday Setup, you’re making a huge one.
Haven’t heard about it yet? Let me explain…
Every Monday, the market kicks back into gear after a weekend of rest… And that reset creates a unique opportunity!
As the first session of the week gets started, we look for a very specific pattern that often shows up like clockwork.
And it has delivered some incredible wins!
Look at this past Monday…
Biopharma Soligenix (NASDAQ) gained an incredible 144%* after announcing a promising FDA designation for one of its treatments.
These are the kinds of morning spikes we hunt for every Monday!
Want to learn how to spot them for yourself?
Watch the video below for the full trade breakdown and strategy tutorial for my Monday Setup.
The piece of the puzzle that traders are missing isn’t some complicated plan or secret software.
It’s something much more basic.
Trust me, if you get this wrong, it’ll hold you back no matter how good your strategy is.
There are four main types of charting methods traders use, and today, I’m gonna break each one down for you.
I’ll cover:
- The pros and cons of each
- Real examples so you can see them in action
- And finally… the #1 chart type I think every serious trader should be using
Table of Contents
Line Charts
These are great if you’re focused on long-term investing. Think IRA accounts, or if you’re holding positions for months, like in swing trading, or years.
Line charts connect the closing prices over time, so you can spot general trends pretty easily.
These are clean and simple with no noise.
Here’s a one-month line chart of NVIDIA (NASDAQ: NVDA):
NVDA One-Month Line Chart; Steady Trade
But here’s the trade-off…
Line charts only show the open and close — you don’t see any intraday movement. So you’re missing those critical highs and lows that day traders rely on.
If you’re holding for the long haul and want to avoid noise — great. Otherwise, you’ll need something more detailed.
Bar Charts
These are a step up in terms of info. You get:
- The open price (left tick)
- The close price (right tick)
- The high and low of the day
Here’s how it works:
As you can see, a bar chart shows way more data than a line chart, and you can see how volatile a stock was during the day.
You’re seeing the entire range of the stock, which is crucial for day trade setups.
Bar charts are great, but they’re just not as popular anymore, especially for new traders. That’s because most educators and other resources now teach using…
Heikin-Ashi
Pronounced “Hi-ken Ah-shee”, these look similar to candlesticks. They try to smooth out price action, kind of like a hybrid between line and candlestick charts.
You’ll still see highs, lows, closes, and opens, but the calculation is different, and the visual style can throw people off.
I’m not a fan of these. To me, they’re just less intuitive.
Japanese Candlesticks (My Favorite)
Now, let’s talk about the gold standard, at least for me…
Japanese candlesticks.
If you’re day trading or even scalping, this is what you should use.
Candlesticks give you everything. Besides, the open, close, high and low, they give you visual cues on momentum and sentiment.
Let’s break it down:
Red candle:
- Top of the body: the open price
- Bottom of the body: the close price
- Wicks: high and low of the day
Green candle:
- Bottom of the body: open
- Top of the body: close
- Again, wicks show intraday range
Here’s a NVDA chart using 5-minute candles:
NVDA Two-Day 5-Minute Candles Chart; Steady Trade
These candles tell a story…
Who’s in control, how strong the move was, and where key levels are.
So on a 5-minute chart, each candle tells you what happened during those five minutes. Same thing on a 1-minute or hourly chart.
I personally prefer 5-minute candles over 1-minute candles. Any time frame shorter than that isn’t giving you enough information.
With candles, you’ll see:
A Common Misunderstanding With Volume Candles
This trips up a lot of traders, and I understand why…
You might see green and red volume bars and wonder, “Wait, why is this bar red? Volume was higher than the last candle.”
The color of the volume bar matches the price candle, not whether the volume increased or decreased.
This is simple once you know it, but very easy to misinterpret if no one explains it.
My Final Thoughts..
If you’re still using line charts or bar charts as a day trader, you’re limiting yourself.
My recommendation?
Stick with Japanese candlesticks. They’re:
- Easy to read
- Universally taught
- Packed with info
- And perfect for spotting patterns, reversals, and the high-quality setups we’re always looking for
If you’re not already using candlesticks, make the switch. Trust me, your future self and your trading account will thank you.
Have a great day, everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
P.S.
Why volatility is a must for day trading.
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