Among TrendSpider’s innovative offerings, Raindrop Charts stand out as a revolutionary way to visualize price and volume data.
These charts offer a more advanced perspective compared to traditional charting methods by effectively blending the volume profile with candlesticks.
Understanding Raindrop Charts
Unlike conventional candlestick charts, which focus on open, high, low, and close prices, Raindrop Charts incorporate volume into their visual representation.
Raindrop charts allow you to view advanced data like the VWAP and volume by price in a simpler way. Generally, the raindrop charts are best used on the daily timeframe.
How to Read Raindrop Charts
The raindrop consists of a few different aspects:
- Left dash: VWAP for the first half of the day
- Right dash: VWAP for the second half of the day
- High: The highest price of the day
- Low: The lowest price of the day
- Volume Shading: Shows volume activity by price
There are three different colored raindrops:
- Green raindrop (Bullish): When the right dash is higher than the left
- Red raindrop (Bearish): When the right dash is lower than the left
- Blue raindrop (Neutral): When both dashes are at the same level
Green raindrops indicate that buyers ended the day in control, signifying bullish momentum going into the next day. However, bulls should look for prior raindrops on the chart for potential resistance levels.
Red raindrops indicate the day ended with sellers in control, meaning the bearish momentum can continue to the next day. However, bears should look for prior raindrops on the chart to see potential support levels.
Blue raindrops show that neither buyers nor sellers were in control, which can lead to a big move in either direction.
Advantages of Using Raindrop Charts
- Makes trend reversals easy to spot: The raindrop charts allow you to see trend reversals easily, especially when there are blue raindrops forming. Similar to doji candles, blue raindrops can lead to breakouts.
- Allows you to see volume: Unlike traditional candles, raindrops show which prices get a lot of volume, which is crucial for determining specific levels of support and resistance.
- Unique to TrendSpider: Raindrop charts were invented by TrendSpider and can very well be one of the best modern charting styles created in recent times.
Practical Application in Trading
Using Raindrop Charts effectively requires understanding their nuances. For instance, a Raindrop Chart with a larger “bulge” in the second half suggests a strong volume-supported price movement.
Traders can compare Raindrop Charts with traditional charts to validate their analysis, enhancing their decision-making process in both short-term and long-term trading strategies.
How to Activate TrendSpider Raindrop Charts
On the TrendSpider platform, navigate to the top left of the chart. Next to the timeframe, you will see the icon to change the chart to raindrop charts.
TrendSpider Raindrop Charts – Bottom Line
Raindrop Charts by TrendSpider are a testament to innovation in financial charting. They offer traders a more nuanced and insightful view of the markets, combining the power of volume and price data.
If you aren’t already, you can sign up for TrendSpider free trial using my affiliate link to try out raindrop charts today!
What makes Raindrop Charts unique?
- Raindrop Charts uniquely blend volume data with price action, offering a deeper insight into market sentiment.
Can Raindrop Charts be used for all types of trading?
- Yes, they are versatile and can be adapted to various trading styles, including swing trading and day trading.
How do Raindrop Charts help in market analysis?
- They assist in identifying potential trend reversals and breakout patterns, backed by volume data for added reliability.
Disclaimer: Financial Tech Wiz is an affiliate of TrendSpider and will be compensated if you purchase a TrendSpider subscription using our link.