Reading a price chart

A price chart is a compressed history of every trade in a period, and learning to read it is mostly about knowing what each visual element encodes.

Candlesticks

Each candle covers one time period (a day, an hour, five minutes — whatever the chart's interval is) and shows four numbers: open (price at the start), close (price at the end), high, and low. A green (or hollow) candle means the close was above the open for that period; red (or filled) means the reverse.

Timeframes

The same stock looks completely different zoomed to one day versus one year. A short timeframe shows intraday noise; a long timeframe shows the real trend and smooths out day-to-day randomness. Neither is "more true" — they answer different questions.

Volume

Often shown as bars beneath the price — how many shares traded in each period. A price move on unusually high volume generally carries more weight (more participants agreed on the new price) than the same move on thin volume.

The trap to avoid

It's easy to see a pattern in a chart that isn't really predictive — the human eye is very good at finding shapes in noise. A chart shows you what happened; treat any "obvious pattern" as a hypothesis to weigh against other evidence, not a certainty.