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How to Read Stock Charts and Patterns: A Beginner’s Guide

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Written by Timothy Sykes
Updated 6/7/2019 18 min read

Warning: I’m nerding out today … on how to read stock charts. Scoff all you want, but charts are critical to trading smart.

One of my all-time favorite books is “Reminiscences of a Stock Operator,” by Edwin Lefèvre (1923). It’s a biographical novel based on the life of legendary trader Jesse Livermore.

The main character in the book, Larry Livingston, goes through ups and downs as he learns to trade. He gains and loses fortunes more than once.

On the subject of reading stock charts, Livingston says this…

“… a chart helps those who can read it or rather who can assimilate what they read. The average chart reader, however, is apt to become obsessed with the notion that the dips and peaks and primary and secondary movements are all there is to stock speculation. If he pushes his confidence to its logical limit he is bound to go broke.” (Emphasis mine.)

Reading stock charts is fundamental to trading penny stocks. When I started trading I put stock charts up on my wall. I studied them and learned to understand what they meant.

I learned to love charts and hope you will, too.

In today’s post, I’ll explain chart-reading basics. I’ll show you the information charts can provide and why you should study charts from the past.

I’ll also give you patterns to look for and links to read more about specific patterns. Finally, I’ll provide links to sites where you can study charts. For a deeper understanding of charts, I suggest you apply for the Trading Challenge.

Let’s get straight to it… 

What Is a Stock Chart?

At its most basic level, a stock chart is a visual representation of price and trading volume over time. Think back to your junior high math class when you plotted points on a graph. You had the x-axis and the y-axis…

On a stock chart, the x-axis represents time and runs left to right. The y-axis runs vertically and represents price and volume.

You should know how to read a stock table and visualize the basic chart. For the more complicated stuff, there are technical indicators.

Some examples include moving averages, Fibonacci retracements, and the Ichimoku cloud. There are dozens of others. I’ll include the moving average and relative strength index later in this post.

Why Use Stock Charts?

I suppose you could ask a drummer why use drumsticks, right?

A price and volume stock chart is the most basic technical analysis of a stock. If you want to trade, you need to study charts. That means you need to be able to read a stock chart.

Basic Reasons for Using Stock Charts

  • Understand the stock’s price and volume history. I consider myself a glorified history teacher. Much of the information you need to trade stocks the way I teach is on the chart. Studying historical charts can give you insight into possible future price action.
  • Learn to recognize patterns. Patterns are a cornerstone of the strategies I teach in the Trading Challenge.

How to Read Stock Charts for Beginners

Tim Sykes pointing at you.
© Millionaire Media, LLC

This is your “how to read stock charts for dummies” primer.

Price & Volume

Again, the y-axis on a stock chart represents price and volume. Price is typically shown as a line graph, a bar graph, or with candlesticks. Some charting software allows histogram and area graphing as well. On nearly all stock charts, volume is represented as a bar graph below the price graph.

Let’s look at some examples. I’ll explain my preferred style later in this post. I’ll also give you some links to StocksToTrade.

Here’s an example of a stock chart. Outlook Therapeutics Inc (NASDAQ: OTLK) had a nice spike on May 17, 2019. Check it out…

how to read stocks charts otlk
OTLK chart: 5-min candles (Source: StocksToTrade)

Again, the x-axis (left to right) represents time. The time period depends on your setting. For example, you can look at an intraday chart from the moment the market opens until it closes. Or you look at a one-year chart to see longer-term trends in price and volume.

The chart above is one day, including premarket and after-hours trading. The far right of the chart is pre-market on the next day (in this example, May 20.) Each candle on the chart represents five minutes. All charting software allows you to change the time frame of candles. The same is true of open-high-low-close (OHLC) bars or line graphs.

Chart Types and Styles

All charting software and apps allow you to choose from several time periods. Use hours, a single day, multiple days, weeks, months, or years.

Common chart types include line graphs and Heikin-Ashi candles. My favorite — and the style I use — is the candlestick chart.

To get an idea of the different chart styles, let’s look at KBLB again. Each chart below is over 10 days with a 15-minute period. Aside from changing the chart style — and the background on the line chart — this is the exact same chart.

These are all KBLB charts, broken down by Heikin-Ashi, line, bar, and candlesticks…

KBLB chart: 10-days, 15-min period, Heikin-Ashi candles (Source: StocksToTrade)


how to read stocks charts kblb line graph
KBLB chart: 10-days, 15-min period, line graph (Source: StocksToTrade)


how to read stocks ohlc bar
KBLB chart: 10-days, 15-min period, OHLC bars (Source: StocksToTrade)


how to read stocks charts kraig 10 day 15 minute candlestick
KBLB chart: 10-days, 15-min period, candlesticks (Source: StocksToTrade)

The chart style you use depends on how you trade and what you want to see. The information in each chart is based on the same data. But the output gives slightly different clues about possible future price action.

Each chart style has advantages and disadvantages. For example, the Heikin-Ashi candle gives a clear picture of reversals and trends. That’s because it uses a two-period averaging formula. But the averaging formula obscures certain price action — which can be a disadvantage.

I use the standard candlestick chart when I trade, and it’s what I recommend for students. First, learn your strategy and how to identify patterns. Then you can start playing with other chart styles.

Moving Average Lines

Moving average (MA) lines are a graphical representation of past price history. A 200-day simple moving average (SMA) plots a line of the average closing price for the past 200 days. The period you choose for the chart determines the period used for the moving average lines.

For more on moving averages, check out this post. It explains in much greater detail the different types of moving averages. It gives you the formula to calculate moving averages and use them as a gauge of support and resistance.

I don’t use technical indicators much when I trade. But the post I link to above shows you some moving average chart setups you can use for trading. For example, some traders use two moving averages — a slow and a fast. They watch for the lines to cross and this signals them to buy or sell.

Relative Strength Line

The relative strength index (RSI) measures losses against gains. Traders use it to determine whether a stock is overbought or oversold. Like with moving averages, most stock charting software allows you to plot an RSI line. It’s usually displayed in a separate graph below the volume bars.

For more on relative strength, read this post. It shows you how to calculate the RSI and use it to determine overbought or oversold conditions. It also explains how some traders use RSI to determine entry and exit points.

A Note About Technical Indicators

There are literally dozens of technical indicators available to you for stock analysis. Some traders love to use them. I prefer to use basic support and resistance and follow recognizable patterns.

It’s important for you to get familiar with different technical indicators. But don’t miss the proverbial forest for the trees. If you find an indicator useful or interesting, by all means — learn how to use it when you trade…

But beware of analysis paralysis! Sometimes technical indicators are in direct conflict with each other.

How to Read Stock Charts — Infographic

I know this technical stuff can make your eyes glaze over. So let’s roll it back a little bit.

This slick infographic breaks it down to basics. It clearly shows a chart’s support and resistance. When you’re able to read charts, you’ll have a better chance of figuring out what happens next.

how to read stock charts

Resources for Stock Charts

I teach my students to recognize the patterns I’ve traded successfully over the years. My favorite patterns change from time to time. I have students trading most, if not all, of the patterns I teach.

I’ve written several posts about patterns. Here’s what you should do to become familiar with patterns. First, check out the following posts on the blog:

Those posts have a ton of information about support, resistance, breakouts, and more. Once you read and re-read them, apply for the Trading Challenge. Get ready to work hard … and have an incredible ride finding your market stride.

Get the Right Equipment

There are lots of stock screening and charting options out there. But my favorite, by a landslide, is StocksToTrade. Designed by traders for traders, it has everything I need, all in one place. I even helped design it and I’m an investor.

I think its charts are incredible. You can choose time constraints between one minute and month to month … This lets you view price action over any time frame. The charts come with lots of economic indicators, and you can view multiple charts simultaneously.

You can also use StocksToTrade to create watchlists, scan news, and monitor tickers. It’s all accessible from your dashboard.

You can take it for a test drive with a 14-day trial for just $7. That’s less than the cost of a fast-food meal to try it for two weeks. I highly recommend you check it out.

How to Read Stock Charts for Day Trading

I made my money day trading. I trade mostly penny stocks, and day trading is all I trust most of them for. Even just overnight, holding shares of junk stocks makes me nervous.

Charts are critical for my day trading strategy. Patterns like breakouts can take place over a long period of time and tell you something about trading right now. This is why you study history.

And if you’re shorting first red days and going long on first green days, certain charts DEFINITELY matter.

Check out my post on dip buying morning panics. Pay attention to these. Even if the chart looks fugly on the way up, the panics are usually predictable. When the setup is right, they’re a thing of beauty.

Frequently Asked Questions About Reading Stock Charts

© Millionaire Media, LLC

Like I said, this post only covers the basics. But while we’re at it, let’s get those burning questions out of the way.

How Can You Read Stock Charts on Robinhood?

The better question is how to read stock charts — period. Focus on your education before jumping right into trading. And do your research to find the broker that best fits your needs. I’d be leery of any broker that gamifies trading...

How Do You Read the Stock Market Index?

There are charts for indexes too. While the S&P 500 won’t tell ya much about penny stocks, it’s still helpful to see the general market trends. This can tell you a lot about which sectors to watch and the volatility in the market.

How Do You Read Charts on Stock Apps?

I don’t recommend using apps for planning trades … And I think the best tool for charts is StocksToTrade because I helped design it for the volatile low-priced stocks I love to trade!

How Do You Read Stock Volume Charts?

Unlike price, volume is pretty uniform in charts. It’s almost always shown as a histogram. This is the bar graph that’s just under the price graph. Check the markings on the borders for what the lines signify.

Apply for the Trading Challenge

I’ve mentioned the Trading Challenge a few times in this post. If you’re getting serious about trading, you should apply today.

The majority of traders fail. Why? I think it’s a matter of lack of preparation. That’s where I want to help you.

The Challenge is where my top students built their knowledge. You can take advantage of the same things they did — often right alongside them. You can access live webinars, the Challenge chat room, and so much more. So it’s up to you to set a learning schedule that fits your life and get to work.

Reading stock charts is only the beginning. Keep in mind, I’m not looking for more students just to have more students. I’m looking for students who are willing to put in the time and effort. If that’s not you, don’t bother.

If it is you … get on it. Don’t put off until tomorrow what you can do today. Start your application process here.

Conclusion: How to Read Stock Charts

When I got into penny stocks, I spent a few weeks simply watching stocks trade. It was fascinating to discover there were certain patterns. Not only were they recognizable to me, but during the dot-com bubble, I found them to be predictable.

Now, more than 20 years later, I still see many of the same patterns. As sectors come into play, so the patterns appear. When a sector goes out of favor, the patterns play out less often.

This is the most important piece of the puzzle, but it’s only one piece of the puzzle. If you’re new to this, check out my FREE penny stock guide next.

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And if you want to get up to speed quickly, I’ve designed a 30-Day Bootcamp for just that purpose.

Trading is like learning a language. Take your time, learn your ABCs … and maybe one day you’ll be writing Shakespeare. Or at least some good knock-knock jokes.

What kind of charts do you use and why? What did you learn in this post that you can use right away? Leave a comment! I love to hear from all my readers.

How much has this post helped you?

Leave a reply
Comments (43)
Henry MurraySep. 29, 2021 at 6:33 pm

Knowledge supports development.

Harish PuduruMar. 04, 2021 at 4:43 pm

Started learning by taking up you challenge. Orientation videos took 4 days to complete due to work. Completed by second day in 30 day Bootcamp. Day by day it is getting interesting to learn about so many things and your exercises answered so many of my initial confusions and making me more confident day by day. It is ocean of information available for us to learn and to become confident. Thank you for all the efforts you are putting.

Timothy SykesMar. 13, 2021 at 6:18 am

Thank you! Keep studying. #nodaysoff

Option Strategies InsiderFeb. 16, 2021 at 12:19 am

This is an informative article. This is a must-read article. Thanks for sharing.

Noah NacillaJan. 31, 2021 at 10:09 am

There’s a lot to learn here. Being on my 6th day on the 30 day bootcamp, i guess there are more to learn which will take more than 30 days. Thanks for this post, I have to check the links as well to understand better.

Stewart MalcolmJan. 17, 2021 at 4:57 pm

I use the candle stick chart type as this type is strongly recommended by you Tim and you have demonstrated how this type is more informative over the other chart types available.

Timothy SykesJun. 28, 2021 at 11:36 am


ShaneJan. 03, 2021 at 10:02 am

Something about being 35. I would have loved to have gotten in to stocks and your challenge 5 or 10 years ago but I just wouldn’t have been ready. I’m having a great time learning and some of these pictures just make me want to learn more.

Timothy SykesJan. 09, 2021 at 3:48 am

It’s not too late. I have plenty of students older than you. Now go study… #nodaysoff

matthew shayDec. 14, 2020 at 12:27 am

Thank You for this post! One nugget that I took here is that Heikin Ashi charts are more indicative of a reversal but often they obscure certain price action. I double checked it for BANT and I saw that it was true last week when the price took off. Most importantly I took from your post that the type of moving average that you use should be based on the type of chart you are using. That was not apparent to me before. Very grateful for your posts and the resources you provide. You are making a big difference in my knowledge and mindset for trading for the better

YulianaDec. 13, 2020 at 10:21 pm

Read this post helped me a lot I took some notes to keep study but this article answered some of the questions l had as a beginner trader.

Newheart1114Dec. 07, 2020 at 12:53 pm

Thanks Tim, getting my trader challenge homework done!

KimsanNov. 29, 2020 at 11:24 am

Hello Tim this is Kimsan from Federal Way WA, I signed up for your 30 day bootcamp and this is my 2nd week, I’m still not understanding. Hopefully this comment gets to you. I learn better at show me and I follow step by step. I can take down many notes all day, but won’t learn much if no one showing me the steps really explain to me. Overall this was helpful to understand the chart reading I’m at 10%.

Timothy SykesDec. 07, 2020 at 8:29 am

Keep studying! Some students watch every video several times before it really sinks in. Also, be sure to read the book you got with the Bootcamp AND do all the exercises in the fast start section.

ValerieOct. 17, 2020 at 3:43 pm

I am in Bootcamp Day 5 as well! I have watched your webinars, completed orientation videos, working on Trader checklist 1 and 2…..endless information and videos. Thank you for that…..overwhelming, I am looking for the “ah ha” moment! Very exciting, thank you, Valerie

JuliaOct. 13, 2020 at 7:16 pm

Today I learnt that there are more technical indicators than I realised. So much to immerse myself in, all the additional links to other articles and books. Now I understand how much there really is to study! Exciting!

Timothy SykesOct. 20, 2020 at 4:15 am

Yes. Study every day!

YakovSep. 24, 2020 at 11:36 pm

Great article Mr. Sykes. Started the bootcamp recently. LOOOOOOOOOTS of information to digest.

Jacqueline HendersonSep. 20, 2020 at 4:30 pm

Newbies: What info did you learn in today’s post that you can use right away?
So, I learnt the basics for reading charts, x and y axis, volume, candle sticks and time terms available. I also want to join the challenge and am just completing the boot camp and will apply. Thank you Tim, the real deal.

Timothy SykesSep. 23, 2020 at 4:06 am

YES! Keep studying.

jennifer lambSep. 16, 2020 at 3:56 pm

yes! bootcamp day 5 super achiever love it very helpful enjoying myself learning your’re such a great teacher. thank you.

Matthew46Sep. 14, 2020 at 4:51 pm

Thank you Tim!

Bonnie Lynn VerbargSep. 02, 2020 at 12:32 pm

I’m going back to read the posts that I didn’t read yet, but enjoyed the lesson. Maybe I’ll be able to complete the homework !? I’m finished with TD Ameritrade today !! So, there will be more time to work !! My husband is working from home more now which doesn’t allow me to play videos at the level that I can really hear and learn. So I watch at night or on YouTube. Slowly .. but definitely !!!

DezeAug. 23, 2020 at 7:28 am

Excellent info…again thank you for teaching!

DezeAug. 23, 2020 at 7:24 am

Excellent! Thank you for teaching!

ThomasAug. 19, 2020 at 6:57 am

Taking as much as I can digest. There is much to process. I am at times overwhelmed. Thank you for the explanations, without which, I would be lost!

Timothy SykesAug. 24, 2020 at 7:29 am

It gets easier in time. There’s not an infinite amount of information so keep studying!

AnonymousAug. 16, 2020 at 6:13 pm

Day 5 Bootcamp. Studying as usual!

Timothy SykesAug. 24, 2020 at 7:41 am


Colette CazabonAug. 12, 2020 at 6:47 pm

Yes, BootCamp Day 5 Super Achiever ! Thanks Tim!

Timothy SykesAug. 24, 2020 at 8:09 am


Narnia DawnAug. 12, 2020 at 7:47 am

Another Bootcamp Day 5 Super Achiever here! Enjoying this process! Looking forward to checking out “Reminiscences of a Stock Operator”.

Timothy SykesAug. 24, 2020 at 8:13 am

YES! Love it!

John G.Aug. 10, 2020 at 9:07 am

BookCamp Day 5 Super Achiever here!

Flora Jean WeissJul. 18, 2019 at 9:31 pm

I like to study with the candlestick charts. I am studying “The Candlestick Course” It is explained and detailed so it’s making me look forward to looking at a lot of charts and see how well I can identify the different types of candle chart terms and signals. (ie: dark cloud cover, engulfing bearish, shooting star, rising window, harami, hammer, and more.
I am working to be interviewed and accepted as a student.
Thank you for all you give.

Deborah S RaynerJul. 09, 2019 at 11:50 am

I am new to trading and find your book extremely interesting. Inow you started with what you consider a small account, my account is only about a fourth of what you had to start with, I can’t afford the challenge yet but hope to keep studying the webinars and stock charts so I’ll be able to learn from you and your staff . I was able to get Stockstotrade and hope that will help.

Jared SpranzaJun. 20, 2019 at 2:42 pm

I found your articles as great inspirations. I’m looking forward to learning even more so much so I stopped by the library to grab a few more investor reads. I really want to learn how to analyze these charts before jumping in so that will be my focus area. After that I’ll start researching the companies that I add to my watch list. Thanks for all the information you’ve posted publicly… in time I plan to be sitting side by side with you thanking you as a newest millionaire. Thanks Jared

Meghan SmithJun. 14, 2019 at 8:49 pm

Hello, I have somewhat recently started on a huge journey of self development and changing and reprogramming my subconscious mind to essentially break the cycle of poverty I grew up in. I have been seeking out methods of passive income and this is so much better than that! I am so grateful for coming across one of your YouTube ads with Brian Rose and somehow fitting in time and watching most of that webinar on my lunch break today. I am quite intelligent and I asked the universe for a sign and I have faith this was it so I am absolutely excited to learn more from you and jump right in to trading! I know I finally get to break that cycle in a more solid way now and set my son up for success and for us to live the life we deserve! Thank you tremendously for this opportunity Tim! I cannot wait to get to interview with you for the challenge and show you what I am capable of! Have a wonderfully abundant day! 😊

Timothy SykesJun. 17, 2019 at 8:07 pm


MichaelJun. 07, 2019 at 4:40 pm

I learned about three food books, to explore chart options – but as a newbie to err on the side of caution and learn Tim’s basic patterns first. Thanks, Tim.

Timothy SykesJun. 17, 2019 at 8:40 pm


MarkJun. 07, 2019 at 11:25 am

I learned about more Training resources I can use to become better at trading, also learned more about reading and understanding how to use the candlestick chart that I use in my small accounts that i’m working on building very slowly. Thank Tim Sykes.

YunathanJun. 07, 2019 at 9:20 am


Author card Timothy Sykes picture

Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (205) 851-0506 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”