How to read a stock chart: candlesticks, volume and moving averages explained

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A stock chart is a picture of what people have been willing to pay for a share over time. Learning to read one helps you understand news, follow discussions and see what has actually happened to a price rather than relying on headlines. This guide covers the basics. It is general education, not financial advice.

The two axes

The horizontal axis is time.
The vertical axis is price.

Check the scale before drawing conclusions. A chart zoomed into a narrow price range makes a small move look dramatic. Many platforms also offer a logarithmic scale, where equal distances show equal percentage changes, which is more honest for long periods where the price has grown a lot.

Line charts

The simplest chart joins up the closing price of each period with a line. Good for seeing the overall direction over months or years, but it hides what happened within each day.

Candlesticks

Candlestick charts show four prices for each period, whether that is a minute, a day or a week:

Open: the first traded price in the period
High: the highest
Low: the lowest
Close: the last

Each candle has a thick body between the open and close, and thin wicks (or shadows) reaching up to the high and down to the low. If the close is above the open, the price rose during the period, and the candle is usually shown green or hollow. If the close is below the open, it fell, usually shown red or filled. Colour conventions vary: in some markets, including South Korea, China and Japan, red often means up and blue or green means down. Check your platform's settings. What the shape suggests:

A long body means the price moved a lot between open and close.
A small body with long wicks means the price swung around but ended near where it started, a sign of indecision.
A long lower wick means sellers pushed the price down during the period but buyers brought it back up.

Traders have names for many candle patterns. They are worth knowing as vocabulary, but no single pattern reliably predicts what happens next.

Volume

Below the price there is usually a bar chart of volume: how many shares changed hands in each period. Volume tells you how much conviction is behind a move. A big price rise on unusually high volume involved a lot of trading; the same rise on thin volume involved few participants and may say less. Sudden spikes often line up with news such as earnings or announcements.

Moving averages

A moving average smooths out the noise by averaging the closing price over a set number of past periods. On a daily chart, the 50-day and 200-day moving averages are commonly watched.

When the price is above a rising moving average, the trend over that period has been upward.
A shorter average crossing above a longer one is sometimes called a "golden cross", and the reverse a "death cross". They are widely discussed, but they describe what has already happened, often with a delay.

Moving averages lag by design. They show the trend; they do not forecast it.

Support and resistance in plain terms

Support is a price level where a falling share has repeatedly stopped falling, as if buyers step in there.
Resistance is a level where a rising share has repeatedly stalled, as if sellers appear.

These levels often sit near round numbers, previous highs or lows, or places where lots of trading happened. When a price breaks clearly through one, the old resistance sometimes becomes the new support. They are zones rather than exact lines, and they break all the time.

Timeframes

The same share can look like it is rising on a one-year chart and falling on a one-week chart. Before discussing a chart, agree on the timeframe:

Intraday (minutes or hours): mostly noise for long-term investors.
Daily and weekly: common for following trends over months.
Monthly and multi-year: shows the long-term picture and major market cycles.

Look at more than one before drawing conclusions.

Adjustments to watch for

Stock splits change the share price without changing the company's value; most charts adjust past prices so the line is continuous.
Dividends reduce the price slightly on the ex-dividend date. A price-only chart understates the total return to shareholders.

What charts cannot tell you

Why the price moved. That is in the news, the company's results and the wider economy.
What the business is worth. A chart shows price, not profits, debt or competitive position.
The future. Patterns that look obvious in hindsight are far less obvious in real time, and plenty of chart signals fail.

Use charts to understand what has happened and to put news in context, alongside the fundamentals of the business. Be wary of anyone selling a chart-based system that promises reliable profits. What confused you most when you first looked at a chart? Ask or share in the comments.