A Brief Introduction to Day Trade Charting by Volatility

Most day traders use a time-based charting system or a volume-based system. The former analyzes prices over time while the latter looks at the overall trading volume. A new system, called a volatile trading system, is spearheaded by Markus Heitkoetter. How does this relatively new system for trading work?

Charting by Volatility

The basics of the chart system chronicle changes within a specific timeframe. It is surprisingly simple. An investor will take a point and determine how much it has changed over the point. A common example is a movement of two points. A vertical line would be drawn that would display a change in two points.

The chart would essentially consist of many vertical lines sprinkled throughout the day. The longer ones would be more volatile because they represent greater point changes. The short ones would be one point or two, typically. Overall, investors would readily see many vertical lines of various lengths positioned across the chart. If there are many lines present, volatility is suggested.

Taking it Further

There is a way to take this a little further that can be extremely powerful. Now, the lines could represent the point difference. But, what if every line was the same? Each line would represent the same change in points. Let’s use the example of two points. If the stock stepped outside this typical change of two points, it would warrant a new line. Theoretically, stocks that were extremely volatile would consist of many new lines that would pattern out to display its volatility. A steady stock would remain flat in this way.

The range bars will illustrate the high of the bar and the low of the bar. The low of the bar will be exactly two points away because the full length of the line is two.

This may be a little confusing. Do not worry because that is perfectly okay. It is simple once visualized. Thankfully, a new video about Markus Heitkoetter and his strategies explains in detail the use of a volatile system. Day traders will be able to expand their foundation and learn new tactics they can apply right this second.