Bars And Waves. Demand And Supply.

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Point — the basic element for geometry. Trade — the basic element for Chart Reading. Each trade is a transaction that represents the meeting minds of buyers and sellers.
The connection between elements creates a more advanced structure. As connected points create lines, connected trades create waves.

Market Consists of Waves

 

Market movements consist of numerous buying and selling waves. Each wave has a duration of time, and each wave has its volume — the sum of volumes of trades inside this wave.

 

Every wave runs as long as it can attract followers. When this following is exhausted the wave finishes, and the opposite wave starts. Every next wave can attract more followers than the previous. The analysis of the relationships between buying and selling waves, their duration, speed, shapes, and progress gives information to conclude if the market is more bullish or bearish.

 

The wave doesn’t develop in a linear direction.  It moves from start to finish by a series of surges. The degree of success or failure of efforts of buyers and sellers gives a clue about a possible immediate future. Browse the history and observe the numerous number of waves of different sizes and forms.

The waves build the sequence of Market auctions. The concept of market Auctions will be discussed later.

So, the structure of the market looks like:

  1. Elementary Trade (agreement of buyer and seller)
  2. Trades make Wave
  3. Waves make Auctions

Market Charts

The bar chart is the classical type of chart for Reading the Market. Historically, Chart Readers did not use candlesticks to present the data from the exchange. Bars are the way to present the process of trading. The waves live beneath the bars.

 

The major waves can cover multiple bars. Bars can contain multiple minor waves inside.
Thinking in waves, not bars, will help you understand the market.

 

The market by itself provides complete information to anticipate future action. Every substantial change in the balance of supply and demand is recorded on the chart.

 

The Law of Supply and Demand has absolute power over every market. When demand exceeds supply, price rises. When supply is greater than demand, price declines. Mastering this Law in making decisions is vital for profitable Chart Reading.


Quantity = Volume

 

On your bar chart, you have the facts about the changing of price and quantity (volume) in time. So, you have all the data to judge the balancing between bulls and bears:

  • volume;
  • price;
  • time

 

The effect of all the factors — news, articles, forecasts, reports, analyses — are already included in your chart. The chart does this hard work for you. It combines and concentrates all these elements into the mixed effect that leads to buying and selling from all participants of the market: operators, and the public.

 

The chart with price and volume is your guide and partner. You don’t need anything else. Believe it, and do not argue with the chart. The chart doesn’t lie.

 

Charts send you a sign of what to do: Sell, Buy, or Wait. The ability to read the signs from charts will give you the edge. No more ‘herd mentality’ trading. Act in harmony with professionals.

5 Comments
  • aaayh
    Posted at 18:18h, 03 July

    Informative Information

  • Isaac Mango
    Posted at 13:14h, 13 July

    Hi Oleg
    Fist of all, thanks for your precise analysis and share your experience.
    I read your explanation about use of bars instead of candlesticks, but you can combine a both graphs, right? one for see the waves and other for see the direction in this time frame.

    Thanks again!

    • olalexandrov
      Posted at 14:58h, 13 July

      Isaac, thank you for feedback. Regarding your question – the waves are lying behind the bars. The Bar-chart is the way to represent the dynamic of waves with OHLC parameters. I prefer bars like the classical standard for the chart reading. In the further explanations, when I would like to focus attention in the wave, I will mark the particular wave by the arrow.

  • Lucas Vieira
    Posted at 15:34h, 27 September

    Hello Oleg,
    Amazing job!
    Just one simple note, the chart of price x volume doesnt seem intuitive, though the concept is clear on the text. As volume is increasing on the supply line, the price should the decreasing. The opposite for the demand.
    Anyways, thanks for the great job!

    • olalexandrov
      Posted at 10:39h, 28 September

      Hello, Lucas. Due to the Law of Supply, the increase of price would produced the increase of volume (quantity of proposition of goods on the market) because more sellers by its nature would be happy to sell their goods/coins/stocks for more expensive prices.

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