What does a stock chart show?
Every price chart is a grid. The vertical scale on the right is price; the horizontal axis at the bottom is time. Each bar or candle covers one period, such as one day on a daily chart, and the last one on the right keeps moving until it closes. The tag on the price scale shows the last traded price.
Hypothetical: on the daily chart at the top of this page, a stock climbs from about $100 to $108.60 in sixteen sessions, with small pullbacks and one strong day on heavy volume. Four parts to find on any chart:
- Price scale (right): the price of every point on the chart.
- Time axis (bottom): dates or times; weekends and market holidays are usually skipped.
- Bars or candles (main panel): the open, high, low and close of each period.
- Volume (lower panel): the number of shares traded in each period.
Line, bar or candlestick chart: what is the difference?
The three common chart types draw the same data differently, as the drawing below shows with the same seven days. A line chart connects the closing prices only: it shows the trend cleanly but hides the opens, highs and lows.
A bar chart, also called an OHLC chart, draws each period as a vertical line from the high to the low, with a small tick on the left for the open and one on the right for the close. A candlestick chart uses the same four prices but fills a body between the open and the close: green when the close is above the open, red when it is below. Most traders use candles because the body shows each period’s direction at a glance; the how to read candlesticks guide covers every part.
Which timeframe should you look at?
The timeframe is how much time each candle covers: 1 minute, 5 minutes, 1 hour, 1 day, 1 week. In the drawing below, one daily candle and the hourly candles of the same session tell one story: the day opened at $100, dipped to $98.50 in the first hour, peaked at $106 and closed at $105. The daily candle keeps only those four numbers; the hourly chart shows the path in between.
Match the timeframe to how long you hold: swing traders often read daily charts, day traders often 5-minute to 1-hour charts. Either way, check one bigger timeframe for direction first, the idea behind multi-timeframe analysis.
How to read volume bars under a stock chart
Volume is the number of shares traded in each period, drawn as bars under the price, usually in the color of their candle. A single bar means little on its own; compare it with the stock’s recent average. Volume shows how much participation sits behind a move, not which way price will go next.
Hypothetical: a stock that trades about 2 million shares a day breaks above a level on 6 million, three times its average, like the tall bar in the drawing at the top of this page. That break has more conviction behind it than one on 1.5 million. Healthy pullbacks in an uptrend often come on lighter volume. Intraday, compare with the same time of day, since US stocks trade far more in the first and last hour. Relative volume turns this comparison into one number.
Linear vs log scale: when does it matter?
On a linear (regular) price scale, every dollar takes the same height, so a move from $10 to $20 looks five times smaller than one from $50 to $100, although both are +100%. On a logarithmic scale, every percentage takes the same height, so the two moves look equal. Use log scale for long-term charts and for stocks that have multiplied in price; over a few days the difference is tiny. On TradingView, click log at the bottom right of the chart to switch. A trend line can fit on one scale and miss on the other, so draw your lines on the scale you trade from.
How to read a stock chart in 5 steps
A routine keeps you from staring at a chart without a plan. Work through the five steps in the drawing below, in order, and skip the chart if a step fails.
Hypothetical, daily chart: a stock has made higher highs and higher lows from $80 to $100 (trend) and turned down twice at $100 (level). Today it closes at $101.50, near its high (candle), on twice its average volume (volume). The plan: buy near $101.50, stop at $97.40 under the last higher low, target the next resistance at $110, about 2:1. A close back under $100 the next day means the breakout failed. On intraday charts, UpTickFlow, our TradingView indicator, marks levels and draws a stop and target when a candle closes at one.
- Trend: higher highs and higher lows, lower highs and lower lows, or sideways? Start on the higher timeframe; the trend lines guide shows how to mark it.
- Levels: where has price turned before? Mark support and resistance zones, prior highs and lows and round numbers, as in the support and resistance strategy.
- Volume: does it rise on moves with the trend and fade on pullbacks? A break on thin volume deserves less trust.
- Candles: wait for a candle to close at one of your levels and react there; an open candle can still change. See the candlestick patterns guide.
- Plan: before you enter, set the stop where the idea is wrong, the target at the next level and the size from the stop, with the position size calculator.