Spread trading using charts

Lets start with the most simple of tools, the humble price chart.

A price chart. Easy enough. A chart of a companies daily closing share price plotted against time. Apart from the most important tool which is ourselves. Our ability to be objective and to make emotionless trading decisions. The price chart is a primary spread trading tool. The pictures of price charts shown below where taken from ADVFN. ADVFN offer free price charts.

Price Chart

Above you can see a price chart for Babcock International. Babcock is an engineering company in the FTSE 250. It shows one thing and that is how the share price changes overtime. The closing share price each day is plotted, which is joined up by a line.

Next we need to add a little more information to our simple price chart. Next we add two moving averages.

Price chart with moving averages

Finally we add share volume to the chart.

Price chart with moving averages and volume

In summary the trading tool box should contain price charts, two simple moving averages, and trading volume. These tools are used in the selection process for choosing which shares (or other assets) to trade online.