1. The four prices inside every candle
A candlestick covers one slice of time: a minute, an hour, a day, whatever the chart is set to. In that slice it records four prices, and those four are the entire vocabulary of technical analysis.
A candle that closes above its open is drawn in the up colour, and one that closes below its open in the down colour. That is the only difference between them.
The real body is the distance between open and close, and it tells you the net result. The wicks are where price went and did not stay, and they tell you what was rejected. Most of the useful information on a chart is in the wicks, because a price that was reached and immediately abandoned says something that a closing price alone does not.
2. Read the trend before anything else
Every pattern in technical analysis means something different depending on what came before it. Reading the trend first is not a preliminary step, it is the step that gives everything else meaning.
The definition is deliberately simple. An uptrend is a series of higher highs and higher lows. A downtrend is lower highs and lower lows. Anything else is a range, and a range is where most instruments spend most of their time. You can see all three by looking at the peaks and troughs and asking whether each one is above or below the last, which takes about five seconds and is the single highest-value habit on this page.
The same candle means opposite things in different places. Here the lower wick matters because four declining sessions came first. Identical shape, after a rise, is a hanging man and warns the other way.
3. Find the levels price keeps reacting to
Support and resistance are not lines someone draws to look clever. They are prices where something actually happened repeatedly: a level price bounced off three times is a level where buyers have shown up three times, and that is a fact about the chart rather than an opinion about it.
The practical test is simple. Look for horizontal prices where the chart has turned more than once. Those are the levels worth marking. A level touched once is a coincidence, and a level drawn through the middle of a candle because it makes the picture tidier is decoration.
This matters because levels are what make a chart read actionable. Knowing that a chart looks strong is not much. Knowing that it is sitting just under a price that has rejected it twice, and that closing above it would settle the question, is something you can plan around.
4. Use volume as the second opinion
Volume is the bar chart underneath the price chart, and it counts how much was actually traded in each candle. Its job is to tell you whether a move had participation behind it.
A breakout through resistance on volume well above the recent average means a lot of people took part in that decision. The same breakout on thin volume means very few did, which is how false breakouts usually look. Volume never gives direction on its own. It tells you how much to believe the direction price just gave you.
5. Pick a timeframe and understand what it hides
The same instrument produces completely different charts at different timeframes, and a pattern that is convincing on a daily chart may not exist at all on a 5-minute one. Neither is more real. They answer different questions.
| Timeframe | Typically used by | What it shows |
|---|---|---|
| 1 minute to 15 minutes | Day traders | Every candle is a few minutes of trading. Patterns appear and dissolve constantly, and most of what you see is noise from routine order flow rather than a change of opinion. |
| 1 hour to 4 hours | Swing traders | The sweet spot for pattern reading. Long enough that each candle represents a real session of decisions, short enough to act on within days. |
| 1 day | Position traders and investors | One candle per trading day. This is the timeframe almost all the classical pattern literature was written against, and where the patterns hold up best. |
| 1 week and above | Long-term holders | Structural only. Useful for seeing where price sits in its multi-year range, useless for anything you intend to do this month. |
One rule survives across all of them: the longer the timeframe, the more weight a pattern carries. A reversal on a weekly chart represents months of accumulated opinion changing. The same shape on a 1-minute chart represents about sixty seconds of order flow.
6. Put the five steps together
Reading a trading chart well is the same five questions every time, in the same order:
- What is the trend, over the last twenty or so candles?
- Which horizontal levels has price reacted to more than once?
- Where is price now relative to those levels?
- Has a recognisable candlestick pattern formed, and does its required context match what step one told me?
- What specific price would prove this read wrong?
Question five is the one most people skip and the one that does the most work. A read you cannot disprove is not analysis, and answering it turns a vague impression into a statement you can check tomorrow. It is also, not coincidentally, the structure the Chartix app follows when it reads a chart you photograph.
Where to go next
The natural next step is the candlestick pattern library, which covers each pattern's formation rules, the reasoning behind it, and the places it reliably misleads people. If you would rather see the method applied than read about it, AI chart analysis explains what an automated read does and does not do.