How to Read a Stock Chart
A stock chart may look complicated at first. But once you understand candles, price, time and volume, it becomes a visual story of what buyers and sellers are doing.
What Is a Stock Chart?
A stock chart is a visual representation of how the price of a stock, ETF or other tradable asset has moved over a period of time.
Instead of looking at a long list of prices, traders use charts to quickly see where price has been, where it is now and how it has behaved along the way.
A chart is the market’s price history displayed as a picture.
The Two Main Parts of a Chart
Price
The vertical side of the chart shows price. Moving higher on the chart represents higher prices, while moving lower represents lower prices.
Time
The horizontal bottom of the chart represents time. Moving from left to right shows how price changed as time passed.
Understanding Candlesticks
One of the most common ways traders display price is with candlesticks. Each candle summarizes what price did during a specific period of time.
Many charting platforms use green for a candle that closes above its opening price and red for one that closes below its opening price. Chart colors can be customized, so the price information matters more than the color itself.
Every Candle Gives You Four Prices
Traders often call these four pieces of information OHLC.
The Body
The thick part of the candle represents the distance between the opening price and closing price.
The Wicks
The thin lines above and below the body show the highest and lowest prices reached during that candle.
What Does a Timeframe Mean?
The timeframe determines how much time each individual candle represents. The same stock can look very different depending on the timeframe you’re viewing.
1-Minute Candle
Each candle represents one minute of trading activity.
5-Minute Candle
Each candle represents five minutes of trading activity.
1-Hour Candle
Each candle represents one hour of trading activity.
Daily Candle
Each candle represents one full trading day.
Charts Help You See Price Direction
When candles are viewed together, you can begin to see the overall movement of price.
Price does not normally move in a perfectly straight line. Markets move up and down as buyers and sellers compete. Traders study those movements to identify trends, important price areas and potential trading setups.
What Is Volume?
Volume tells you how much trading activity occurred during a period of time. On many charts, volume appears as vertical bars underneath the price chart.
Higher volume means more shares or contracts changed hands during that period. Traders often compare volume with price movement to better understand how much participation is behind a move.
A Beginner’s Chart-Reading Routine
Look at the timeframe.
Know exactly how much time each candle represents.
Look at the overall direction.
Is price generally moving higher, lower or sideways?
Study the candles.
Notice where price opened, closed and how far it moved.
Look at volume.
See whether trading activity is increasing or decreasing.
Look for important price areas.
Notice where price repeatedly stops, reverses or reacts. These areas lead directly into our next lesson: support and resistance.
Watch: How to Read a Stock Chart
Prefer to learn by watching? A step-by-step LYKTrader video walkthrough will accompany this lesson so you can see these chart concepts explained directly on screen.
Key Takeaways
- A chart shows how price has moved over time.
- Candlesticks show the open, high, low and close.
- The candle body shows the relationship between the open and close.
- The wicks show how high and low price traveled.
- The timeframe determines how much time each candle represents.
- Volume shows the amount of trading activity.
- Charts help traders study price behavior — they do not predict the future with certainty.
Don’t rush to fill your chart with indicators. First learn to understand what price itself is doing. Indicators are tools — price is the foundation.