from the last. It can go up and go down. You track thatchange in price
that junction of supply and demand.
So the static number
the price on any given day
is notas important as the direction and rate of change. And chartslet you understand them much, much more easily thanlooking at a list of numbers.
When charting, always remember two things: KISS and
the 90/10 rule. KISS, of course, stands for “Keep It Simple,Stupid.”
The 90/10 rule, meanwhile, states that you can get90 percent of the information from something in about 10percent of the time, but it takes the remaining 90 percent of the time to get the remaining 10 percent of the information.
A Basic Chart
re we go any further, let’s defi ne the elements of a basic
chart. Figure 6-1 is a daily chart that shows the emerging-markets exchange-traded fund (EEM) from July 2008through April 2009 and is from the invaluableDecisionPoint.com site that I use regularly.
The most basic thing on the chart, of course, is the priceitself. Since this is a daily chart, each vertical line or bardepicts the trading for a particular day. The high and lowprices each day are connected with a vertical line, and theclosing price is represented by a little cross-tick.
The solid line on the price chart is a moving average. Thisone happens to be a 50-day exponentially smoothed movingaverage, but there are many, many different moving averagesin use among market technicians. Moving averages are used