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How can we analyze a chart from scratch?

This is one of the first obstacles a novice trader must overcome when trying

analyze charts from the point of view of price action and volume.

The first thing to say is that when it comes to a chart, the cleaner, the

better. There's no point in having lots of objects or indicators on it.

The only thing this does is hide the most critical piece of information, the

price. Our first goal is to determine the current long -term context to know

the market is in a trend or in a range.

There is no designated timeframe for each objective.

I always say that it will be the chart itself that tells us which timeframe is

best to use at each moment.

For reference, the long -term context is generally best identified on either

daily or weekly charts.

Depending on the history of the asset, sometimes just looking at the H4 chart

may be enough.

While on the other occasions, you will need to look at the monthly chart, but

a general rule, most of these analyses will be daily or weekly.

Once on the chart, the first thing we are going to do is find where the latest

sideways movements are with respect to the current price.

This sign will give us the current long -term context.

Here, there are only three options and each one offers us a different context.

The identification of the context will answer the first and most important

question for our subsequent trading approach.

What kind of strategy are we going to look for?

In other words, what do we want to do, buy or sell?

In which direction is the greatest control of the market?

These key questions should be resolved in this first context analysis.

In short, it is about establishing the directional bias of the market.

Once we are clear about the bias, The strategies we will implement must be

aligned with it, so we always try to trade in favor of the least resistance.

That is, if we see a distribution structure above, the context will be

and therefore we should look for selling opportunities.

The market is unbalanced to the downside and we should only be looking for short

buys.

Later, we will see up to what point. For now, we are sticking with the key

concept that the path of least resistance is downwards.

If we open a chart and do not see an accumulation range below, we will

the context as bullets, and therefore we should look for buying opportunities.

Unlike the previous example, in this case, the control is on the side of the

buyers. Most market participants have agreed that the asset is cheap and

higher prices.

That is why we should only be looking for long positions.

Finally, if we find ourselves within a sideways movement, The context will be

neutral and therefore we should look for trades at the edges, in other words,

look to buy at the lows of the structure and sell at the highs, or do absolutely

nothing and wait for the imbalance to occur.

It is during the development of these ranges that we put into practice all the

analytical tools that the methodology offers us to try to discern what is

happening and where the market is most likely to turn.

Fundamentally, most of the participants consider that price and value converge

approximately in the entire price range covered by the structure, and therefore

a movement towards the high part is seen as an opportunity to sell, and a move

to the bottom of the structure would present an opportunity to buy.

Up to what point?

Well, as we saw with auction theory, this will continue until something

at the fundamental level.

that changes the valuations of the agents and the price leaves this

zone to look for another one higher up or lower down.

As we can see, this first overall analysis to understand the current

is fundamental, since it will determine how we are next going to proceed.

The market can only be in two situations, a range or a trend.

Within these, there are only three possible trading contexts.

Look to buy if it is in a bullish context.

Look to sell if it is in a bearish context.

Look to trade at the edges or do nothing if it is in a range context.