Beginner · Lesson 3 of 11 · 5 min video · 8 min read
Reading a chart
A chart is a record of every fight between buyers and sellers. Once you can read candles, timeframes, trend and key levels, any chart starts to make sense.
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Candles
Each candle shows what price did in one period of time, such as 15 minutes. It shows four prices: the open, the high, the low and the close.
- A green (up) candle closed higher than it opened. Buyers won that period.
- A red (down) candle closed lower than it opened. Sellers won.
- The thick part is the body. The thin lines above and below are the wicks: how far price went before being pushed back.
A long wick shows rejection. A long wick on the bottom means sellers pushed price down, but buyers pushed it back up before the candle closed.
Timeframes
The same market looks different on different timeframes. A 1-minute chart shows every small move; a daily chart shows the big picture.
- Higher timeframes (4 hours, daily) show the main trend and the big levels.
- Lower timeframes (5 and 15 minutes) help you time your entry.
- A common way to work: find the trend on the 4-hour or daily chart, then look for an entry on the 15-minute chart in the same direction.
Trend
Markets move in waves, not straight lines.
- An uptrend makes higher highs and higher lows.
- A downtrend makes lower highs and lower lows.
- A range moves sideways between a rough top and bottom.
Moving averages help you see the trend at a glance. When price stays above a rising 50 EMA, the trend is usually up.
On the 4-hour chart, GBPUSD has made three higher highs and three higher lows, and is above its 50 EMA. You only look for buys on the 15-minute chart, ideally after a pullback.
Support and resistance
Support is a price area where buyers have stepped in before, so price has bounced up. Resistance is an area where sellers have stepped in, so price has turned down.
- Treat them as zones, not exact lines.
- The more times a level has held, and the higher the timeframe, the more traders watch it.
- When resistance breaks, it often becomes support when price comes back to it (and the other way round).
- Round numbers (1.1500, 4,000) and yesterday’s high and low are levels many people watch.
Putting it together
Before any trade, answer four questions: What is the trend on the higher timeframe? Where are the nearest support and resistance? Is price at a level, or in the middle of nowhere? Does this candle show buyers or sellers winning?
Common mistakes
- Trading only the 1-minute chart and never looking at the bigger picture.
- Drawing dozens of lines until every price is a level.
- Buying right under resistance or selling right on top of support.
Check yourself
1. What does a long wick at the bottom of a candle tell you?
Sellers pushed price down, but buyers pushed it back up: a sign of rejection of lower prices.
2. What does an uptrend make?
Higher highs and higher lows.
3. Old resistance has just broken. What often happens when price comes back to it?
It often acts as support.
Try it on BTM
For education only, not financial advice. Trading carries a high risk of losing money, especially with leverage. Only trade with money you can afford to lose.
For educational purposes only. Nothing here is financial advice. Past performance does not guarantee future results, and trading carries a high risk of losing money, so only trade with money you can afford to lose. Read the risk warning.