Evolution of Charts

ProSticks (Bonus Intro) – Technical Analysis Methods


Jul.19.2013

ProSticks are the latest format when it comes to charting visuals. The evolution of charts didn’t end with candlesticks, just as the evolution of cell phones didn’t end with the Motorola Razr.Some curious but lazy traders also wanted to know what other traders had been doing so that they could make better decisions on their own trades. They wanted to be able to see the volume of trades in a specific period of time. They wanted to know when and at what price the longer-term investors took advantage of high or low prices, or at what price the short-term traders were comfortable with both buying and selling.

Imagine knowing all the daily gossip about a currency pair just by looking at one chart!

The Invention of ProSticks

In the 1980s, a genius called Peter Steidlmayer and the Chicago Board of Trade developed a system called Market Profile that integrated time and volume on a daily basis. While it looked ugly and was not user-friendly, it did help traders study the underlying nature and strength of the market.

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In this coffee break session we are not going to learn about how Market Profile works because it will just give us a headache. Instead, we are going to talk about the revolutionary ProSticks (Stick for Pros.)

ProSticks not only visualized Market Profile, but also let the Bars and Candles into the game as well. Now you're happy you learned about the bars and the candles aren’t you?

In a ProStick, the open, high, low, and closing prices are displayed exactly as they are in a bar chart. A ProStick’s body looks very much like that of a candlestick, with a white stem signaling an up day and a darker color signaling a down day.

ProSticks Show High, Close, Open, Low and Highest Volume ProSticks Show High, Close, Open, Low and Highest Volume

ATTENTION: In ProSticks unlike candleticks, the top of the colored body does NOT represent the open or close price. Similarly the bottom of the colored body does NOT represent the open or close price.

The close and open prices in ProSticks are displayed as they are displayed in bar charts.

The body of a ProStick is mainly used for two things: (1) its color, which shows whether the prices went up or down, and (2) the active range.

The active range basically shows where the short-term traders or day traders took advantage of the prices, thinking that nobody would notice. But the ProStick users will catch them off guard!

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But it doesn’t end here. In addition to this nasty little secret and all the other gossip about currency pairs, including open, close, high, and low, ProSticks’ charts also provide one other piece of information that is perfect for all the ladies out there who hate to be manipulated.

They give the most heavily transacted price for a specific time period. This is called the modal point, and it is shown as a dot in ProSticks.

The modal point in the forex market helps weed out manipulation of financial markets. These manipulations are usually caused by large inflows by a major player during a short period of time, like during the open and the close, when the price can be influenced very easily. The major players are basically like the celebrity tabloids that create false gossip and take your attention away from the real world, which in a forex trader’s life is the market sentiment. That’s why false breaks are less likely to happen with ProSticks than with the previous-generation charts. (You will learn about false breaks in the next coffee breaks.)

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To sum it up, ProSticks is an enhancement or complement to the previous-generation charts. It can be compared to the iPhone and BlackBerry, which are the most convenient cell phones in the history of phones. (Okay, maybe not BlackBerry.)

With ProSticks, you can now identify within a second exactly where most of the trading for any time period took place, spot false breaks accurately, and avoid being manipulated by the heavy hitters.

That being said, many forex platforms don’t include the Prosticks in their chart collection. That is why we are going to display most of the charts in this book in the candlesticks form. One thing you can do after mastering the candle-based technical analysis is to simply reconfirm your analysis with the free ProSticks charts online before you make a final trading decision.

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