How to Read a Stock Chart

Stock charts are the language of the financial markets. Understanding how to read one helps you make more informed investment decisions. Here's a beginner-friendly guide to the basics.

The Price Chart

The most basic stock chart shows price on the vertical axis and time on the horizontal axis. You can view charts across different timeframes — one day, one month, one year, or more.

Line Charts

A single line connects closing prices over time. Clean and easy to read, but hides intraday movement.

Candlestick Charts

Each "candle" represents one time period and shows four data points:

Open: price at the start of the period
Close: price at the end
High: highest price during the period
Low: lowest price during the period

Green candles mean the price closed higher than it opened. Red candles mean it closed lower. The "body" shows open-to-close range, and "wicks" show the high and low.

Volume

Volume bars below the price chart show how many shares were traded. Volume confirms price movements:

Rising price + high volume = strong buying interest (bullish)
Falling price + high volume = strong selling pressure (bearish)
Price movement + low volume = weak conviction, may not last

Moving Averages

Moving averages smooth out price data to show trends:

50-day moving average: medium-term trend
200-day moving average: long-term trend

When price is above the moving average, trend is generally up. A "golden cross" (50 MA crossing above 200 MA) is bullish; a "death cross" is bearish.

Support and Resistance

Support levels are like a floor — the price bounces up from them
Resistance levels are like a ceiling — the price pulls back from them
When a stock breaks through resistance, it often becomes new support

Key Patterns for Beginners

Double bottom: price drops, bounces, drops to same level, bounces again — bullish reversal
Head and shoulders: three peaks with the middle highest — bearish reversal
Cup and handle: U-shaped recovery followed by a small pullback — bullish continuation

What Charts Can't Tell You

Charts show price history, not the future. They don't tell you about a company's fundamentals — earnings, revenue, debt, or competitive position. Use charts alongside fundamental analysis, not as a replacement.