A stock chart shows the price of a stock over time. Once you know what to look for, you can read most charts in under a minute. Here are the five things to check, in order.
1. Pick the timeframe
Every chart has a timeframe: how much time each bar or candle covers. On a daily chart each candle is one trading day, on a weekly chart one week, on a 5-minute chart five minutes.
Beginners should start with the daily chart. It filters out most of the noise, and you can plan a trade in the evening without staring at the screen. Glance at the weekly chart to see the bigger trend.
2. Read the candles
Most traders use candlestick charts. Each candle shows four prices for its period:
- Open: the price at the start
- Close: the price at the end
- High: the top of the upper wick
- Low: the bottom of the lower wick
The thick body spans the open and the close. A green candle closed higher than it opened (buyers won that day); a red candle closed lower (sellers won). Long wicks mean price went somewhere and got pushed back. A long upper wick, for example, means buyers pushed price up and sellers drove it back down before the close.
3. Find the trend
Look at the swing highs and lows:
- Uptrend: higher highs and higher lows. Each rally goes further, and each dip stops higher.
- Downtrend: lower highs and lower lows.
- Range: price moves sideways between roughly the same high and low.
Moving averages help. When price is above a rising 50-day moving average, the trend is generally up. Most beginner-friendly strategies only buy stocks in uptrends.
4. Mark support and resistance
- Support is a price where falling prices keep stopping and bouncing: buyers step in there.
- Resistance is a price where rising prices keep stalling: sellers step in there.
The more times a level holds, the more traders notice it. When price finally pushes through resistance, that's a breakout. When a level breaks, it often flips roles: old resistance becomes new support.
5. Check the volume
The bars at the bottom of most charts show volume: how many shares changed hands. Volume shows conviction. A breakout on twice the usual volume says many traders are behind it; a breakout on thin volume is easier to reverse.
Putting it together: from chart to trade plan
Reading the chart is step one. A trade also needs a plan:
- Entry: where you buy, for example just above resistance
- Stop loss: where the idea is wrong (what is a stop loss?)
- Target: where you take profit
- Size: how many shares, so a loss costs 1-2% of your account (position size calculator)
TradeBoo can do the first pass for you: upload a screenshot of any chart and Boo reads the trend, levels and volume and drafts the entry, stop and target, so you can check its work against what you've learned here.
Key takeaway
Timeframe, candles, trend, levels, volume: check them in that order, and only plan a trade once all five tell the same story.
