Price Is a Story

A stock chart is a visual history of every trade ever made in that stock. Every price movement represents someone who thought the stock was worth buying and someone who thought it was worth selling at that exact moment. Learning to read charts means learning to read the story of supply and demand.

Candlestick Charts: The Standard

Most traders use candlestick charts. Each candle represents a specific time period (1 day, 1 hour, 5 minutes, etc.) and shows four prices:

Open — The price at the start of the period
Close — The price at the end of the period
High — The highest price during the period
Low — The lowest price during the period

The "body" of the candle (the thick rectangle) shows the range between open and close. The "wicks" (thin lines) extend to the high and low. A green/white candle means the close was higher than the open (bullish). A red/black candle means the close was lower (bearish).

Volume: The Forgotten Indicator

Volume — the number of shares traded — confirms the strength of a price move. A stock rising 5% on massive volume is much more significant than a stock rising 5% on thin volume. The former suggests strong institutional conviction. The latter could just be random noise.

Key volume patterns:

High volume on breakouts — When a stock breaks above a resistance level on above-average volume, it signals genuine buying pressure. The breakout is more likely to hold.
Low volume on pullbacks — If a stock declines on low volume, it suggests the sellers aren't committed. The uptrend may still be intact.
Climax volume — Extreme volume spikes (3-5x normal) often mark the end of a trend. Everyone who wanted to buy has bought, or everyone who wanted to sell has sold.

Trend Lines and Moving Averages

A trend line connects at least two swing lows (uptrend) or swing highs (downtrend). It's a simple but powerful tool — as long as the trend line holds, the trend is intact. A break below an uptrend line is a warning.

Moving averages smooth out price data to reveal the underlying trend:

50-day moving average (50-DMA) — Short-term trend. Stocks above their 50-DMA are in a near-term uptrend.
200-day moving average (200-DMA) — Long-term trend. This is the most watched moving average. A stock above the 200-DMA is generally considered to be in a bull market.
Golden Cross / Death Cross — When the 50-DMA crosses above the 200-DMA, it's called a Golden Cross (bullish). The opposite is a Death Cross (bearish).

Support and Resistance

Support is a price level where buying pressure has historically overcome selling pressure, creating a floor. Resistance is where selling pressure overcomes buying, creating a ceiling. These levels are self-reinforcing — traders remember them and place orders around them, which makes the levels more significant.

Key Takeaways

Candlestick charts show open, close, high, and low — the four most important prices for any time period.
Volume confirms or undermines price moves. High volume = conviction. Low volume = noise.
Moving averages and trend lines help you stay on the right side of the market's direction.