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Catalin
Published On: Jun 26, 2024
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Empty Charts vs. Charting Tools: Which One to Choose

Empty Charts vs Charting Tools: What's the Best Option for Swing and Day Trading Environments?

In crypto trading as in other trading fields, traders rely on charts to identify trends, potential entry and exit points, and make informed decisions.  

It is a crucial skill to learn to analyze price movements in the fast-paced world of crypto trading.

There are two main approaches to trading: empty charts and charting tools.

Empty charts refer to the style of analyzing advantages and disadvantages from the perspective of pure price action. No tools, technical indicators, or even not even any drawings.

Charting tools are instead the style of implementing various indicators or drawing trendlines to identify opportunities.

What's the Best Option for Swing and Day Trading Environments

Understanding Empty Charts and Charting Tools

Empty charts, also known as naked charts, offer a minimalist approach to price analysis. Although we are discussing crypto markets, there is a famous book called naked forex which has helped traders to learn this style of charts.

They are intended to view pure price action, typically in the form of candlesticks or line charts, without any technical indicators. 

This allows traders to focus solely on the price to identify support and resistance levels, and potential trend reversals, demand, and supply zones.

Charting tools, on the other hand, provide a wider range of options and perspectives to follow the market. The combination of price action and technical indicators aims to provide a more comprehensive analysis of the market.

These tools offer various technical indicators on the price chart, such as moving averages (identifying trends), RSI (assessing overbought/oversold conditions), and Fibonacci retracements (predicting potential price support or resistance levels).

Charting tools also come with drawing tools to help traders mark interesting zones to keep an eye on. 

In the same way, some of these drawing tools make calculations in real-time assessing stop-loss and take profit targets, percentages, and more. Very popular in Tradingview, for example.
Benefits and Drawbacks candles

Benefits and Drawbacks

Some pros to remark from empty charts:

  1. Visibility: The fact that there are no indicators reduces distractions, allowing traders to focus solely on price movements.
  2. Indicator Bias: Empty charts eliminate potential biases by technical indicators, prioritizing the assessment of price action.

Cons:

  1. Signals: In the absence of technical indicators, identifying entry and exit points can be more challenging, especially for novices.
  2. Wrong interpretation: understanding price action on empty charts requires a deeper understanding of price patterns and market behavior.

Pros and Cons of Charting Tools:

Pros:

  1. Deep Analysis: Technical indicators as well as drawing tools add advantages of analysis, making it useful to obtain insights into market sentiment, momentum, and potential support/resistance levels.
  2. Decision-Making: The combination of information, price action and indicators can lead to much better trading decisions.

Cons:

  1. Overload: Having too many indicators can cloud the chart, making it hard to identify key price movements.
  2. Analysis and confusion: Relying heavily on indicators can lead to indecision, as conflicting divergences/convergences signals emerge from different technical indicators.

Benefits and Drawbacks

Suitability for Trading Styles

Empty charts can be suitable for day trading, identifying entry and exit points is crucial. The lack of technical indicators might make it clearer to spot short-term opportunities.

For swing traders who focus on longer timeframes, empty charts can be good but carrying a set of tools for this case can be more beneficial. However, an empty chart always allows for better visualization of trends and support/resistance zones of short-term as well as long-term price movements.

For these cases, swing traders can benefit from combining a few key technical indicators to complement their analysis trends. A few ones like Moving averages can help confirm trends and Fibonacci retracements can offer potential entry points within the broader trend.

Some day traders heavily rely on technical indicators and charting tools in general. For detailed fast analysis, tools like RSI can help identify overbought/oversold conditions, and MACD can signal short-term momentum shifts for entry and exit points. Bollinger bands strategies are also popular.

Making the Right Choice

When a trader choose between empty charts or charting tools, might consider:

  1. Trading Experience: Novices might find empty charts challenging, while experienced traders can take advantage of the analytical capabilities of charting tools.
  2. Trading Style: Swing traders might prefer a simple environment, while day traders require more detailed analysis provided by analytical tools.
  3. Personal Preference: The best approach will depend on individual comfort and analytical skills. Experiment with both methods to discover what fits your trading strategy.

Making the Right Choice

Here are recommendations for different types of traders based on their specific needs and objectives in swing and day trading:

  1. Beginner Swing Trader: Evaluate starting with empty charts to understand price action and then gradually incorporate a few key technical indicators as your knowledge expands.
  2. Experienced Swing Traders: Combine empty chart analysis with other chosen technical indicators that fit your trading strategy.
  3. Day Traders: Use charting tools with a focus on relevant indicators for short-term analysis, but maintain a balance too.

Conclusion

We've seen that empty charts offer a clear view of price movements, allowing independent analysis, while charting tools provide a wider range of technical indicators for comprehensive market analysis.

Traders could experiment with both methods. In professional trading it is common to manage a swing trading strategy with charting tools for more trending assets, and empty charts for day trading, but in the end it will depend on the trader's comfort.

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Catalin

Catalin is the co-founder of Altrady. With a background in Marketing, Business Development & Software Development. With more than 15 years of experience working in Startups or large corporations. 

@cboruga
@catalinboruga5270