Stock charts can look intimidating — a wall of candles, lines, and numbers. But the underlying concepts are simpler than they appear. Here's a plain-language walkthrough of the basics: what candlesticks show, what volume tells you, and how moving averages and support/resistance levels are used.
Each candlestick on a chart represents price movement over a chosen time period — a day, an hour, or even a minute, depending on the chart's timeframe. A single candle conveys four pieces of information:
The thick rectangular part of the candle (the "body") spans between the open and close prices. If the close is higher than the open, the body is typically shown in green or white; if the close is lower than the open, it's typically shown in red or black. The thin lines extending above and below the body (the "wicks" or "shadows") show the high and low for that period.
| Candle Colour | What It Means |
|---|---|
| Green / White (bullish) | Closing price was higher than opening price for that period |
| Red / Black (bearish) | Closing price was lower than opening price for that period |
| Long wick / shadow | Price moved significantly in that direction during the period before reversing |
| Small body, long wicks ("doji"-type) | Open and close were close together despite significant intra-period movement — often interpreted as indecision |
Volume — the number of shares traded during a period — is usually shown as bars below the price chart. Volume provides context for price movements: a price move accompanied by high volume is generally considered more significant (more participants agreeing on the direction) than the same move on low volume. A sharp price rise on unusually high volume, for instance, may indicate stronger conviction behind the move than a similar rise on a quiet trading day.
A moving average (MA) plots the average closing price over a set number of recent periods, updating continuously. Commonly used periods include 20-day, 50-day, 100-day, and 200-day moving averages. Because they smooth out daily fluctuations, moving averages are often used to gauge the general direction (trend) of a stock — for example, a stock trading consistently above its 200-day moving average is sometimes described as being in a "long-term uptrend", though this is a description of past behaviour, not a prediction.
Support refers to a price level where a stock has, in the past, tended to stop declining and bounce back up — often because more buyers stepped in at that price. Resistance is the opposite: a price level where a stock has tended to stop rising and pull back, often due to increased selling. These levels are drawn by looking at where prices have historically reversed and are used by some traders as reference points for potential entry, exit, or stop-loss placement. They are observations about historical price behaviour, not fixed barriers — prices regularly move through both support and resistance levels.
Chart reading is one input among several that some traders use, typically alongside fundamental analysis of the underlying business and broader market context. For a beginner following our guide to getting started, it's worth understanding these basic concepts simply to make sense of financial media and charting tools — but a long-term, diversified investing approach generally does not require active chart monitoring.