This is a discussion ot Charting Basics, line chart, bar chart, and candlestick charts. It also explains the difference between Arithmetic and Lograrithmic presentation of Stock Charts.

1. The Responsible Trader Lessons
The Responsible Trader’s - POV
The Responsible Trader Lessons
Module 2 – Charting Basics

2. The Responsible Trader Lessons
The Responsible Trader’s - POV
• The Responsible Trader's POV (Point of View).
• These are my notes, my own additional research and studies on the
Topic that I posted, and my personal observations and opinions that I
am sharing to further enhance our knowledge and understanding.
• Some of these were previously posted on “The Responsible Trader”
thread, Stock Market Pilipinas (www.stockmarketpilipinas.com). This
is the latest version of previous posts I made.
• Some of these plus further explanations and discussions will be
appearing in my forthcoming book “The Responsible Trader.”
The Responsible Trader Lessons

3. The Responsible Trader Lessons
The Responsible Trader Lessons
Quick Review - What is the Trend?
Can you draw the Trendline?
H1
L1
H3
H2
L3
L2
Dow defined an uptrend as a situation in which each successive rally closes higher than the previous
rally high, and each successive rally low also closes higher than the previous rally low. In other words,
an uptrend has a pattern of rising peaks and troughs

4. The Responsible Trader Lessons
The Responsible Trader Lessons
Quick Review – What is the Trend?
Can you draw the trendline?
H1
L1
H2
H3
L2
L3
The opposite situation, with successively lower peaks and troughs, defines a downtrend. Dow's
definition has withstood the test of time and still forms the cornerstone of trend analysis.

5. The Responsible Trader Lessons
The Responsible Trader Lessons
Quick Review – What is the Trend?
Can you see an Uptrendline or a Downtrendline?
H1 H2 H3 H4
L1 L2 L3
This is a sideways or flat trend with the Highs and the Lows on the Same Level with each other.
There is no discernible Uptrendline or Downtrendline

6. The Responsible Trader Lessons
The Responsible Trader Lessons
Charting Basics
Line, Bar and Candlesticks
If I give you the following intraday data for a certain stock can you
draw a line chart, a bar chart and a candlestick chart
Open at 9:30 A.M. P10.00
High at 11:30 A.M P25.00
Low at 2:00 P.M. P 5.00
Close at 3:30 P.M. P15.00

7. The Responsible Trader Lessons
The Responsible Trader Lessons
P25.00
P20.00
P15.00
P10.00
P5.00
Line Chart
9:30 A.M 11:30 A.M. 2:00 P.M. 3:30 P.M.
Data
Open at 9:30 A.M. P10.00
High at 11:30 A.M P25.00
Low at 2:00 P.M. P 5.00
Close at 3:30 P.M. P15.00
P R I C E
T I M E

8. The Responsible Trader Lessons
HIGH 25.00
CLOSE 15.00
OPEN 10.00
LOW 5.00
The Responsible Trader Lessons
P25.00
P20.00
P15.00
P10.00
P5.00
From Line Chart to a Transition Image
9:30 A.M 11:30 A.M. 2:00 P.M. 3:30 P.M.
Data
Open at 9:30 A.M. P10.00
High at 11:30 A.M P25.00
Low at 2:00 P.M. P 5.00
Close at 3:30 P.M. P15.00
P R I C E
T I M E

9. The Responsible Trader Lessons
HIGH 25.00
CLOSE 15.00
OPEN 10.00
LOW 5.00
The Responsible Trader Lessons
P25.00
P20.00
P15.00
P10.00
P5.00
From Transition Image to Price Bar
9:30 A.M 11:30 A.M. 2:00 P.M. 3:30 P.M.
Data
Open at 9:30 A.M. P10.00
High at 11:30 A.M P25.00
Low at 2:00 P.M. P 5.00
Close at 3:30 P.M. P15.00
P R I C E
T I M E

10. The Responsible Trader Lessons
CLOSE
The Responsible Trader Lessons
A Japanese
candlestick
Is composed
of two lines.
A vertical
line called
the shadow
or wick and
the full
height
represents
the trading
range.
HIGH
LOW
Two Horizontal Lines representing
Open and Close For the period
Usually connected as Rectangle
CLOSE
OPEN
Shadow or Wick
Shadow or Wick
HIGH
LOW
OPEN

11. The Responsible Trader Lessons
HIGH 25.00
CLOSE 15.00
OPEN 10.00
LOW 5.00
The Responsible Trader Lessons
P25.00
P20.00
P15.00
P10.00
P5.00
From Price Bar to Candlestick
9:30 A.M 11:30 A.M. 2:00 P.M. 3:30 P.M.
Data
Open at 9:30 A.M. P10.00
High at 11:30 A.M P25.00
Low at 2:00 P.M. P 5.00
Close at 3:30 P.M. P15.00
P R I C E
T I M E

12. The Responsible Trader Lessons
The Responsible Trader Lessons
P25.00
P20.00
P15.00
P10.00
P5.00
Candlesticks
Would you believe me if I tell you that
this is a Candlestick with a Name?
9:30 A.M 11:30 A.M. 2:00 P.M. 3:30 P.M.

13. The Responsible Trader Lessons
Using our usual procedure, we can see that the Open, High, Low and Close
are all the same – P15.00
If you are in a relationship, this is what you call platonic, no action, nothing
is happening. For this reason in Candlestick Charting this is Called a Four-
Price Doji
When I started learning candlestick charting, I found it hard to remember all
the Japanese terms. So I did some out-of-the-box thinking. I used key words,
to be more specific Pinoy words, to strengthen my memory association.
For a better appreciation of Candlesticks, let us do some out-of-the-box
thinking and try to look at candles from the eyes of a Pinoy trader.
The Responsible Trader Lessons
P25.00
P20.00
P15.00
P10.00
P5.00
9:30 A.M 11:30 A.M. 2:00 P.M. 3:30 P.M.

14. The Responsible Trader Lessons
A Doji is a Candlestick with no Real body. Doji’s signify indecision on the
part of the Buyers and the Sellers. There are four of them:
Cross Doji Dragonfly Doji Gravestone Doji 4-Price Doji
It is very difficult to remember Japanese terms so I use key words as memory aid. For the
Doji my Pinoy keyword is Dolphy. Skinny, when he was still alive. May he rest in peace.
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15. The Responsible Trader Lessons
Japanese Candlesticks with Real Body and without or very little Wicks or Shadows are called Marubozu
High
Same as
Open
Green Marubozu - Bullish Red Marubozu - Bearish
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High
Same as
Close
Open
Same as
Low
Close
Same as
Low
The closing price determines the color of the candle. If the close is higher than the open, then the color is green and vice versa.
Marubozu in Japanese means “close cropped” or shaven head and shaven bottom. My keyword is “maraming nabusog.”
If you see something like that is shaven head and shaven bottom I am sure “maraming nabusog na mata.” Another keyword is
“maraming nabusog” na traders because there are many trades that happened during the day

16. The Responsible Trader Lessons
A Candlestick Pattern consisting of a Candlestick with a Real Body followed by another Candlestick with a
Smaller Body is called Harami.
Bullish Harami Bearish Harami
Harami is a two-candlestick pattern where the last candle is contained within the range of the
previous candle and is the opposite color.
Harami in Japanese means pregnant. My keyword is “harang me”. If my wife is pregnant I
cannot make ……… kaya naharang ako. Just fill in the blanks, I might get censored by MTRCB.
The Responsible Trader Lessons

17. The Responsible Trader Lessons
The Responsible Trader Lessons
The Importance of Viewing Charts on Different Time FrameS
Daily Chart showing Break in Uptrendline
Weekly Chart showing Uptrendline still Intact
Monthly Chart showing Strong Uptrendline

18. The Responsible Trader Lessons
Arithmetic vs. Logarithmic Price Scale
An Arithmetic or Linear Price Scale is plotted on the side of the chart so that there is an equal distance between the
prices, and each unit change on the chart is represented by the same vertical distance on the scale, regardless of what
price level the asset is at when the change occurs.
By contrast, a Logarithmic Price Scale is plotted so that the prices in the scale are not positioned equidistantly; instead,
the scale is plotted in such a way that two equal percent changes are plotted as the same vertical distance on the scale.
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Image source: http://www.investopedia.com/ask/answers/05/logvslinear.asp
Price Scale same
Distance 5, 10,
15, 20, 25, etc.
Price Scale
from 10 to 15
wider than
from 35 to 40