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Tutorial: How to Read Stock Charts and Candlestick Charts Like a Pro

In this post, I want to share with you how to read a stock chart. If you’re brand new to trading, investing, options, and if you’ve never looked at a stock chart before, we’re going to simplify it down for you.

And I’m going to show you just like back in grade school a simple and easy way to read a stock chart like a pro.

Reading Stock Chart – on paper

Here we have a Facebook chart. This is called the ticker symbol – FB.

There’re other tickers like:

  • McDonald’s – MCD
  • Nike – NKE

They all have abbreviations. You can look those up, or you could memorize them with time as you look at stocks you’ll know what they are. They’re just three to four characters.

When you look at a stock chart, there’re two simple lines you have to remember. Sometimes you’ll see the axis on the left. Sometimes you’ll see the axis over here on the right.

It just depends on the stock charting software that you have. In general, you have a timeline, just like if you’re a video editor. This might be the year 2016, 2017, 2018, 2019. And that timeline represents the stock.

The price is $30, $40, $50, $60 a share. These numbers could be over on this side. For example, if in 2016 that stock was $32 a share, it might be over here.

Let’s say 2016 February it might be over here $34 a share. All you do is you look at what time do I want to look at something. If you want to look at something in 2016, you just take a look at your timeline.

You pick your date and your time, and then you look up where the price is. If the price was over here, then you could go over, and you could say that it was around $50 a share at that time.

And then what happens is with time the lines get connected. That’s what creates a stock chart. Sometimes things go up; sometimes things go down. And then they go back down and then come back up and so forth and so on.

Places where things change directions

These places where things change directions are called swing points. They’re also known as support and resistance. If you’ve ever seen, people draw lines like this way that is also known as a support point.

But when you look at these stock charts, what happens sometimes is you’re looking at this as a line chart. Sometimes you can look at things like an area chart. And this is filled in. It might be a little bit easier to spot those kinds of things.

It’s all colored. This one is a yearly chart. You’ll also note that. You’re looking at it a year where every tick here pretty much represents a day, a month, or a year depending on what you’re looking at the chart.

Some charts are more zoomed in. I might be looking at just this quadrant and this area. And that might be like every bar every dot would represent more along the lines of zoomed in version.

This might be the year 2019. And now all of a sudden I might go January, February, March, April, May, June, July and so forth.

Again the same concept applies. It’s just a little more zoomed in. And then what you do is you start lining up the dots what the price was for that day.

Reading Candlestick Charts

The stock price starts here. It wiggles throughout the day. It could be through the week through the month, depending on what this candle represents.

This could be:

  • a one day candle 
  • a one month candle
  • a one year candle 
  • a one week candle

It goes in here; it starts the day, week, month, whatever, then wiggles around, and then it ends.

The easier way is to look at candle kind of like this for beginners. It starts here.

This is called OHLC – open, high/low, close.

And you start the next day boom; you move over. These are the dots. That’s how it works when it comes to a stock chart. If we go in and we just look at a basic stock chart, here is a stock chart.

Reading Stock Chart – trading platform

Here is my time frame. Every tick right here is a minute, five minutes, ten minutes.

I could do it a daily – 2 days, 3 days. I could do it weekly, monthly, quarterly. If you’re a long-term investor, you’ll probably be looking at the monthly or the weekly. You could see each bar is a month.

That bar is November. This bar is October. This bar is September. You can see we started September here wiggled around, and it closed a little bit higher.

For some people, it’s a lot easier to switch these settings. We can change the drawings, edit chart properties. And when you look at the price style, we’re using candlesticks. You could just do the line graph. This is what some people do. And you have like a line. That’s what we talked about connecting.

Here’s the OHLC – open, high/low. I think that’s easier to learn from. You can see there are different types of data. Here are just the bars which are not as useful. Here’s an area, so you could see it’s shaded in.

And here is Heiken-Ashi. 

Pro Tip: The most one that uses either this one open high/low close, which I think is easier for beginners to learn. And then you can go to candlesticks because it’s easier to see.

Here we opened right there. We wiggled around; this was our high. And we closed here. Then again, we open next month.

Wiggled around and boom, and we got here to the lows, here to the highs and close right there. That’s all it does, and that’s how it works.

And when you look at it on a minute chart, which you’ll be able to see actually as some of these things wiggle. Let me go in here on more of a live trading platform.

We’ll go into like a one-minute chart right here. You can see it wiggling. And what you’ll see is this stock now is moving down.

The last-minute what happened was we started that last minute here, we’re wiggling, and it’s moving lower.

You can see it there. It’s moving lower. And that’s the way it works. I could change this setting to a candle.

Now you can see it wiggling around. And that’s all it is. That’s how you would read a stock chart. Once this minute is complete, we’ll see how it ends. Then it’ll move to the next bar and the next tick.

And that’s what creates the chart. You could also do something like even less than a minute on some of these.

Stock Chart Zooming

The other thing I want to show you is the zoomed-in properties as you can notice that I zoomed in a little bit here and there on these ticks.

You can do that on any charting platform pretty much. Right now, I’m looking at it on one minute or tick by tick basis. Here is our monthly chart. Here is the weekly chart. Here is the daily chart.

And you could zoom out, and you’ll notice here at the bottom I see 2016, 2017, 2018, 2019. But if I go to the monthly chart, you see the time frame goes all the way to 1985.

That’s because each bar is a month. You could pack more data on the bottom.

I hope this makes a lot of sense for you guys, just at least as a starting point.

We talked about swing points earlier. Here’re swing points all over the place.

Those are the places where things change direction. And these swing points are used for support and resistance.

You’ll notice that’s what you’re doing is you’re combining things.

They don’t always match up, but you’ll often see breakouts in those levels in areas. The same thing here. You’ll notice here’s support we’re in resistance, and that’s where stocks bounce.

You’ll also often see things on the bottom. Notice here this is the volume. This is the amount of shares traded.

There’s a lot of other indicators that could go down there. But typically the volume which just tells you the strength of how many shares are being bought or sold.

Obviously, just like when you push a gas pedal in a car. If you push it hard (just like here you buy a lot of shares), it’s going to go up fast.

If you don’t buy a lot or you don’t push the gas pedal as strong, it’s going to go slower. And that’s what that is used for.

Final Word

If you want to learn a lot more, definitely check out the TradersFly website. 

There are tons of great courses that I have available as far as trading goes.

Check these courses out and help you become a better trader, investor, and look at things a little bit more informed in the stock market.

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