Charts are the language of the stock market. Those who can read charts understand what the market is saying.

The Candlestick Chart

Each candle shows 4 pieces of information: Open, Close, High, Low.

Green candle: Close higher than open (price rose). Red candle: Close lower (price fell).

Recognizing Trends

Uptrend

Higher highs AND higher lows. Connect the lows with a line — that is the trendline.

Downtrend

Lower highs AND lower lows. Connect the highs.

Sideways

Price oscillates between support and resistance. Wait for a breakout before trading.

The 3 Most Important Candle Patterns

1. Hammer

Small body on top, long wick below. Appears after a downtrend. Meaning: Buyers fought back — possible upward reversal.

2. Engulfing

A large green candle completely engulfs the previous red candle. Strong buy signal.

3. Doji

Open and close nearly identical (cross-shaped candle). Meaning: Indecision — often precedes a large move.

Choosing Timeframes

5-minute: For day traders
Hourly: For swing traders
Daily: The standard — start here
Weekly: For the big picture

First Practice Tip

Open the daily chart of any ETF. Zoom to 1 year. Try to identify the trend. Draw the trendline. That is your first chart analysis.

Bottom Line: Reading charts is a skill that comes with practice. 15 minutes per day suffice. In 30 days you will see the market with different eyes.