How to Read the Market Each Session
To read the market each session, start on a slower chart to decide what you are allowed to do, mark the levels before the session opens, then wait for price to reach one. The decision is made in advance and the session only supplies the timing.
“Reading the market” sounds like a skill you develop. In practice it is a routine you run, and most of what makes it work happens before the session starts.
Before you start
A shortlist from the night before — three to five names, produced by a screen rather than by a tip.
One higher timeframe chart per name. Four times slower than the one you trade is a reasonable default.
Levels marked before the open. This is the part that has to be finished before the session, not during it, and the reason is on the last section of this page.
The steps
1. Start on the slow chart
Trending or ranging, and which way. That answer restricts what you may take today; it does not generate a trade. The multi-timeframe page is the long version.
2. Mark the levels while the market is shut
Prior highs and lows, yesterday’s range, the busiest price. Drawn while you are flat and have no opinion to defend.
3. Note which hours actually have people in them
A level tested in a quiet hour has been tested by fewer participants, per trading sessions. Weight it accordingly rather than ignoring it.
4. Write what you will do if price reaches each level
Entry, stop, target — for each level, in advance. If price arrives and you still have to decide, the routine has not been run.
5. Then wait
Nothing else. Price either reaches a level or it does not, and if it does not, the session is over and you were right.
6. Write down what happened, including the nothing
The sessions with no trade are data. A record of only the days you traded is filtered by the judgement you are trying to improve.
How to tell it worked
Three checks, and none of them is about profit.
The routine took about 15 minutes. If it took an hour, you are analysing rather than preparing — the analysis was supposed to be finished last night.
Every trade you took was written down before it happened. Count them. A session where two of three trades were written in advance is a session with one unplanned trade in it, and that number is the one to drive to zero.
And most sessions produced nothing. If yours produce a trade every day, the levels are not selective — the measurement in the next section is why.
Most of it is waiting
The most-taught beginner signal — relative strength index (RSI) crossing back up through 30 — fired four times in 576 bars.
The longest gap between two of them was 329 bars — 57% of the entire history with nothing to do at all.
No video can show you that, because 329 bars of nothing is not watchable. Its absence from everything you have ever seen is why the waiting feels like a personal failure rather than the job.
And the boredom has a price attached to breaking it. Every unplanned trade pays a round trip; at 123 trades on one measured history that came to 67% of the gross.
What the routine is not
Three things get done in the name of reading the market that are a different activity wearing its name.
Watching the news. By the time a headline has reached you it is in the price — that is what a gap is. Knowing that an announcement is scheduled changes whether you hold a position; reading the announcement does not change the level.
Scrolling instruments. Looking at forty charts until one looks interesting is selection by appearance, and what looks interesting is almost always what has already moved. The screen ran last night for exactly this reason.
Adding indicators mid-session. An indicator added while a position is open is being added to win an argument. Whatever it says, you already know which answer you wanted, and the choosing indicators page shows that a second tool usually agrees with the first anyway.
All three feel like work and none of them is the routine. The routine finished before the open.
The original data
Across our study of 24,971 trading videos, 47 cover reading the market as a routine. The median one gets 2,064 views, and 98% never pass 50,000 — the second-highest saturation figure measured anywhere in this glossary, behind only forex or stocks at a clean 100%. The median length is 26.9 minutes.
The corpus carries description text for only eight of those 47, which is too thin to say anything about how the topic is written, and this page does not.
Read those two figures together. Nearly half an hour long, and 98% never reaching 50,000 views — a subject that takes a long time to explain and that almost nobody finishes watching.
When it fails
You marked the levels during the session
A level drawn while you hold an opinion is a level drawn to justify it. This is the single most important line on the page and it costs nothing to follow.
The routine became analysis
Preparation has an end. If you are still working when the session opens, you will be deciding in the moment, which is the condition the whole routine exists to avoid.
You traded to fill the session
A day with nothing at a level is a day with no trade in it. Watching for four hours creates pressure to justify the four hours, and that pressure is the mechanism behind almost every trade taken outside a plan.
You judged the read at the edge
Nothing. That is the answer the routine gives, and it is the one that feels least like reading the market and is most of what reading the market actually is.
Related
How to find an entry is what happens at the moment price reaches a level.
How to find stocks to day trade is where the shortlist comes from the night before.
And chart reading is the underlying skill this routine is built out of.
The routine took me longer to accept than any technique, because most of it is not doing anything. I spent two years assuming that if I was not in a position I was missing something, and almost everything I lost in that time came from that assumption rather than from bad reads.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.