This a worked example of the charts I use, the indicators that are in them and what they mean. Chart example is posted first and then the explanation underneath it.
Looking first at the price action chart, which is the top one:
Moving Averages: In the above example there are 6, four exponential moving averages (EMA), and two simple moving averages (SMA). Both types of moving average (MA) take a price point (I use closing price) for a set number of periods (this chart is a weekly chart so each period is one week), add them all up and divide by the number of periods. SMAs just add the values together and divide by the number of periods, whereas EMAs add a weighting to the more recent ones when they add the values together (and subtract a weighting from the older ones) before dividing by the number of periods. EMAs consequently respond more accurately to the latest price movements.
The moving averages used here are:
3 EMA (green line) 7 EMA (light purple line) 13 EMA (lighter blue line) 26 EMA (orange line)
50 SMA (darker blue line) 200 SMA (red line)
The heavy black line on the chart is the zero line, so just ignore that one.
Channels: These are related to moving averages because they are calculated from the EMA in the middle of the channel, which in this case is the orange 26 EMA. In the above chart, the channel lines are the two lines that border the price bars at the top and bottom. In this case the channel looks like a funnel lying it's side.
The EMAs in the above chart are important because they show where areas of "value" (as defined by the market via the chart) are. "Fair value" on a chart is the line in the middle of the channel, or the 26 EMA in this case. For some reason, prices almost always eventually return towards the 26 EMA, whether they are above it or below it. It's like a magnet.
When you're looking at a chart, you want to buy when the prices are close to one of the EMAs (depending on which average they look like they will stop at).
On the other hand you want to sell when the prices approach the channel line as when they reach here they begin to feel the gravity of the 26 EMA. They may keep going for a while after leaving the channel, but the channel is the alert to let you know to start looking out for the prices to start returning to the 26 EMA. In the above example you can see how the price has bounced off the channel line and is now returning toward the 26 EMA (It may stop at one of the EMAs above the 26 EMA, depending on how strong the rally is. In very strong rallies, the price seems to return to the 3 EMA before resuming it's climb for example). In this case it has dropped below the 3 EMA and is heading for the 7 EMA.
The 50 SMA and 200 SMA are used slightly differently: they are seen as benchmark levels of support and resistance. When prices either break above them to the upside or below them to the down side, it's seen as a strong indication of increasing bullishness (up) or bearishness (down). Also when the 50 SMA crosses the 200 SMA, it's also seen as a major indication (of bullishness if the 50 crosses above the 200 from underneath, bearishness if the 50 crosses below the 200 from above. These crosses are normally called a "golden cross" for the bullish one, and a "death cross" (I find that a bit morbid so I call it a bearish cross) for the bearish one.
Also if prices are sitting above upward sloping 50 and 200 SMAs, the market is seen as bullish. If they're sitting below downward sloping 50 and 200 SMAs, the market is seen as bearish.
Volume:the green and red bars at the bottom of the price chart represent the net amount of buying or selling volume for the period (green for buying, red for selling). For volume though I prefer to use the Elder Force indicator which is calculated using volume combines with the amount of price movement that was achieved during the period. It's the fourth chart of the group shown. In the above example, Elder Force is showing that buying volume and the ability of the buyers to push the price up is reducing.
MACD: The second chart of the set. This shows momentum to the upside or the downside of the price action. In the above example, the MACD lines are shown with a histogram. Basically if the lines are upward sloping there is bullish momentum (and vice versa), and if the histogram bars are increasing in height there is bullish momentum.
A very strong indication of a change in price direction is if the slope of the MACD lines is sloping down but the two most recent price rallies peaked at higher high points. This is called a divergence. You can also use divergences in the RSI and Elder Force. There are no divergences in the above chart.
Elder Impulse: the price moves are strongest when the trend shown by the moving averages and the momentum shown by the MACD are in sync. This indicator makes it easier to see when this is the case by changing the colour of the price bar: green means trend and MACD are in sync to the upside, red means in sync to the downside and yellow (it's normally blue but yellow was easier to see on these charts) means the two are out of sync.
Elder Impulse and Elder Force were invented by trading author Alexander Elder, hence their name as a point of interest.
RSI: the third chart down. This is an oscillator, used to identify when the market is overbought (above 80, as has recently been the case in the above example) or oversold (below 20). The oscillator moves up and down according to whether the market is rallying or selling off.
You can use trendlines on the RSI as well (shown). If they break below an upward sloping one, it indicates a turn downward in prices. If it breaks above a downward sloping one, it indicates a turn upward in prices.
Divergences (as described above in the MACD section) of RSI and price are also significant signals of a possible change in direction of price.
So this is the set of indicators that I like to use (they're the ones I learned from the materials that I studied), but there are many others. A few on Hot Copper like to use Elliot Waves, and I have also seen a few who like to use chart shapes such as rising/falling wedges and head-and-shoulder patterns. These are a different take on the same information and are just as valid as the material above as long as they're interpreted correctly.
There is plenty of information on Google and Youtube about technical analysis (the proper name for charting), as well as many books.
The one I started with was called "The New Trading for a Living" by Dr Alexander Elder which I found to be a good start. I could recommend that one. The above set of indicators is based heavily on what I learned from that book, but these indicators are very widely used.
Learning charting is one of the most frustrating things you'll ever do (well it was for me), but once you begin to be comfortable with it you'll find that it is well worth the effort to learn it.
