Silver, You Got To Know How

We have identified the most commonly made mistake in technical analysis to be the representation. Representation equals psychology! Psychology being the most important aspect of trading means that the way charts are represented is extremely important. Rarely do we see trading supportive setups. Silver, you got to know-how!

Here are a few tips we find useful to get the best out of your chart space.

Less is not always more.

In our opinion charts from cell phones are useless. Their aspect ratios and general size do not allow for the professional to translate into a decision-making process that is conducive to execution. While larger handheld devices and small laptops are an upgrade to these stamp size representations, we still vote for a multi-screen trade setup for the following reasons. For backtesting and chart analysis you want to see nuances of various time frames represented next to each other.

For execution, you want a quiet workspace meaning it isn’t conducive to flip between workspaces or expand and collapse windows. Take small time frames. Sorting and execution windows should be outside your main visual sensory field as they produce a lot of data leading to data exhaustion over time. Split widescreen monitors into halves or thirds because stretched chart windows distort the ratio to the point that trend and range differentiation are hard to make out. This being one of the most important things to read out of a chart.

Silver, Monthly Arithmetic Chart. Silver, you got to know-how!

Silver in US Dollar, monthly chart as of January, 2011

Silver in US Dollar, monthly chart as of January 7th, 2021.

Another aspect little known is the principle on how to use arithmetic versus logarithmic charts. You want to use arithmetic charts for shorter time segments to have an accurate representation of trends and ranges. For long term monthly data it is advisable to use logarithmic representation. This is due to the fact that event proportions get swallowed once price ranges are stretched.

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Disclaimer: All published information represents the opinion and analysis of Mr Florian Grummes & his partners, based on data available to him, at the time of writing. Mr. Grummes’s ...

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