Table of contents
Start with a single candlestick
Each candlestick represents one time period (a day, a week, an hour) and shows four prices: open, high, low and close.
| Candle part | What it shows |
|---|---|
| Body (thick part) | Range between the opening and closing price |
| Wick / shadow (thin lines) | The highest and lowest price reached during the period |
| Green/white body | Closed higher than it opened (bullish for that period) |
| Red/black body | Closed lower than it opened (bearish for that period) |
Moving averages — the trend’s “smoothed” line
A moving average plots the average closing price over a set number of periods (e.g., 20 days), smoothing out day-to-day noise so the underlying trend is easier to see.
Trend strength: is there a real trend at all?
Not every stock is trending — many spend long periods moving sideways. The ADX (Average Directional Index) is a common tool for measuring trend strength regardless of direction: readings above roughly 20-25 suggest a real trend is in place; readings well below that suggest choppy, directionless price action where trend-following tools are less reliable.
Momentum: RSI and MFI
RSI (Relative Strength Index) and MFI (Money Flow Index) measure how “stretched” recent price momentum is, typically on a 0-100 scale. Readings above 70 are commonly read as overbought (momentum may be due for a pause); below 30 as oversold. MFI adds trading volume into the calculation, which some traders find gives a more reliable read than price-only RSI.
Volume — the confirmation layer
Volume shows how many shares changed hands in a period. A price move on high volume is generally considered more meaningful (more participants agree with the direction) than the same move on low volume.
| Price move | Volume | Common interpretation |
|---|---|---|
| Up | High | Strong conviction behind the move |
| Up | Low | Weaker conviction, worth watching for confirmation |
| Down | High | Strong selling pressure |
| Down | Low | Possibly a quiet drift rather than active selling |
Putting it together: a simple reading checklist
- What’s the overall trend? (Check price relative to a moving average, and ADX for strength.)
- Is momentum stretched or fresh? (Check RSI/MFI.)
- Is the move backed by volume, or thin?
- Where’s the nearest support/resistance, in case the trend pauses or reverses?
Bottom line
Chart reading is pattern recognition built from a small number of repeatable building blocks: candles, moving averages, trend strength, momentum and volume. Practice reading these on charts you already know the outcome of (historical data) before applying them to live decisions.
StockRanker Research Desk
The StockRanker Research Desk publishes independent, educational market and personal-finance content for Indian readers. We are not SEBI-registered analysts or advisers.
