A stock chart is a visual record of price movement over time. Learning to read one gives you the ability to see what a stock has done recently, how it behaved during similar conditions in the past, and where buyers and sellers are likely to step in next.

Candlestick basics

Most trading platforms display price data using candlestick charts. Each candlestick represents a specific time period, whether that's one minute, one hour, one day, or one week.

A single candlestick tells you four things: the opening price, the closing price, the highest price reached during that period, and the lowest. The thick part of the candlestick is called the body. If the closing price was higher than the opening price, the candle is green (bullish). If the closing price was lower, the candle is red (bearish). The thin lines extending above and below the body are called wicks, and they show the high and low extremes.

A long green body means buyers were in control for most of that period. A long red body means sellers dominated. Small bodies with long wicks suggest indecision, where the price moved sharply in both directions but ended up close to where it started.

What volume tells you

Volume measures how many shares traded during a given period. It appears as a bar chart beneath the price chart, with each bar corresponding to the same time period as the candlestick above it.

Volume confirms the strength of a price move. If a stock rallies on high volume, that move has conviction behind it. Lots of participants are agreeing that the stock is worth more. If a stock rallies on low volume, the move is thinner and more likely to reverse.

The same applies to selloffs. A sharp drop on heavy volume signals real selling pressure. A gradual decline on light volume might just be a lack of buyers rather than active dumping.

Pay particular attention to volume spikes. A sudden surge in volume often coincides with a catalyst like an earnings report, a news headline, or a breakout through a key price level. These spikes mark the moments when the market's opinion shifted meaningfully.

Common technical indicators

Indicators are mathematical calculations applied to price and volume data. They help traders identify trends, momentum, and potential turning points. Here are the ones you'll encounter most often.

Moving averages smooth out price data to show the underlying trend. The 50-day and 200-day moving averages are the most widely followed. When the price sits above its moving average, the trend is considered bullish. When it sits below, bearish. A "golden cross," where the 50-day crosses above the 200-day, is a classic bullish signal. The opposite, a "death cross," signals bearish momentum.

The Relative Strength Index (RSI) measures how fast and how far price has moved recently on a scale from 0 to 100. Readings above 70 suggest a stock may be overbought and due for a pullback. Readings below 30 suggest it may be oversold and due for a bounce. RSI doesn't predict reversals on its own, but it flags when a move may be stretched.

MACD, which stands for Moving Average Convergence Divergence, tracks the relationship between two moving averages. When the MACD line crosses above the signal line, it suggests building bullish momentum. When it crosses below, bearish momentum. Traders use MACD primarily to confirm the direction and strength of a trend.

How to put it together

No single element on a chart tells the full story. A green candlestick doesn't mean a stock is going up tomorrow. High volume alone doesn't tell you direction. An RSI reading of 75 doesn't guarantee a reversal.

The value of chart reading comes from combining these elements. A breakout above a key price level, confirmed by a volume spike, with RSI still below overbought territory, tells a more complete story than any one signal alone. The best traders use charts to assess probability and make informed decisions, not to predict the future with certainty.