Detailed Guide on How to View Candlestick Charts and Analyze Stock and Forex Prices from the Basics

To succeed in stock trading or forex, the first essential step is to master the skill of reading price charts. Through technical charts, traders can identify the direction of price movement, detect market fluctuations, and make reasonable buy or sell decisions. So, how to read candlestick charts accurately? The following article will help you understand better.

🔍 The Three Main Types of Charts in Stock and Forex Trading

Line Chart - Simple but Limited

This type of chart only shows the closing price at the end of each selected time frame. It provides an overview of the long-term trend of the stock without delving into details.

Advantages: Easy to view, easy to understand, suitable for comparing price movements of multiple stocks over a long period.

Disadvantages: Cannot capture fluctuations within specific trading sessions, not suitable for short-term analysis.

Bar Chart (HLC/OHLC) - Multi-Dimensional Information

This chart type provides complete information about opening price, closing price, highest, and lowest within a trading session. The OHLC (Open-High-Low-Close) version is preferred because it includes the opening price.

Advantages: Offers comprehensive information about price movements within a session, the length of each bar reflects the degree of fluctuation, making it easy to identify price patterns.

Disadvantages: When used for long-term analysis, the bars can be too thin, making observation difficult.

Candlestick Chart (Candlestick) - The Most Popular Tool

This is the most widely used chart type among traders because it provides detailed information about prices (open, close, high, low) and reflects investor and seller psychology. Learning how to read candlestick charts helps analysts confidently decide whether to buy or sell.

Advantages: Comprehensive information, combines short-term market psychology with long-term trends, offers many analysis patterns for high accuracy.

Disadvantages: Too much information can be overwhelming for beginners.

📊 Main Components on TradingView Platform

1. Asset information: Stock name, current price, percentage change compared to the opening price
2. X-axis: Time frame
3. Y-axis: Price scale
4. Technical indicators: Additional analysis tools
5. Time frame selection: From seconds, minutes, hours, days, weeks to months
6. Chart type: Options between line, candlestick, bar…
7. Drawing tools: Support, resistance, trend lines
8. Indicator library: MACD, Bollinger Bands, MA, RSI…
9. Comparison feature: Comparing prices across multiple assets

🎯 Five Key Factors When Reading Price Charts

1. Recognize Price Trends

The first step is to observe the overall direction of the price over a certain period. It is important to identify trends at three levels: short-term, medium-term, and long-term.

For example, if you look at the weekly chart of AAPL stock, you may see an overall upward trend (green candlesticks). However, on the daily timeframe, there are many ups and downs. Based on how to read this candlestick chart, investors can infer that the medium-term price will continue to rise, but they might wait for daily dips to enter the market at a better price.

2. Identify Resistance and Support Levels

These two concepts are fundamental in technical analysis:

• Support level: The price level where the price tends to bounce back rather than continue falling
• Resistance level: The price level where the price often encounters resistance and reverses downward

The simplest way to recognize them is to find price levels where reversals frequently occur. For example, with Bitcoin (BTC) at $88.83K with a 1.54% fluctuation in 24 hours, you can observe that each time the price hits a certain line, it bounces back – that’s support. Conversely, if the price is repeatedly blocked at a certain level – that’s resistance.

Each time the price hits these levels, their effectiveness diminishes. The more times BTC hits resistance without breaking through, the higher the chance of a breakout in subsequent attempts.

3. Analyze Trading Volume

Trading volume reflects the strength of a price movement. It is usually displayed as columns below the chart.

• When the price rises accompanied by increasing volume, it’s a positive signal indicating market consensus
• If the price rises but volume decreases, it may warn of trend weakness
• Significant price changes with high volume indicate a fundamental movement

Combining volume analysis with trend observation provides a more solid basis for forecasting.

4. Impact of Fundamental Events

TradingView integrates major events such as stock splits, earnings reports, dividends. These events often cause strong volatility.

For example, when Tesla announced a stock split on August 31, the price formed a long green candle during the session, but in the following days, it reversed downward due to current shareholders taking profits. For day traders, monitoring upcoming events is very important.

5. Use Technical Indicators

Besides price and volume, professional traders often add indicators like Bollinger Bands, MA, RSI, MACD, Stochastic to get more accurate trading signals.

📈 Popular Technical Indicators

Bollinger Bands - Volatility Bands

This tool includes a moving average (MA) in the middle and two bands above and below. The upper band acts as resistance, the lower band as support.

A simple strategy is to buy when the price touches the lower band and sell when it touches the upper band. However, success rates are not always high, so it’s recommended to test on a demo account first.

Moving Average (MA)

This indicator helps identify long-term trends. The two most common MAs are the 50-day and 200-day:

• 50-day MA crossing above the 200-day MA: Price tends to reverse upward
• 50-day MA crossing below the 200-day MA: Price tends to reverse downward

RSI Indicator

RSI measures the relative strength of the price, oscillating from 1 to 100. The three key levels are 30, 50, 70:

• RSI above 70: Overbought, likely to decrease
• RSI below 30: Oversold, likely to increase
• RSI crossing 50: Helps determine the current trend

MACD Indicator

This indicator combines moving averages with a histogram, showing the speed of price change.

• Histogram turning from red to green: Buy signal
• Histogram turning from green to red: Sell signal

Stochastic Indicator

This tool measures price changes over a specific cycle, similar to RSI:

• Crossing above 80: Overbought
• Crossing below 20: Oversold

💡 Conclusion

The skill of reading charts is the foundation of all successful trading. Candlestick charts are the most popular because they provide the most detailed information. The three basic elements every trader must understand are: price trend, support/resistance levels, and trading volume.

Additionally, you can combine technical indicators for more accurate signals. However, no indicator is 100% correct, so it’s advisable to test their effectiveness on a demo account before applying to real trading. Continuous practice with analysis tools will help you become a better trader.