Learning How to Read Stock Charts: A Complete Step-by-Step System for Beginners

In the world of securities investing, learning how to read stock charts is not just a useful skill but a language investors must learn to communicate with the market. Properly reading stock charts helps you clearly grasp price movements and increases your chances of making rational decisions, not relying on guesses.

Statistics from global financial markets show that experienced analysts have a success rate 60-70% higher than those relying on intuition. This confirms that proper chart analysis is a science, not luck.

Price Reflects Everything: The Foundation of Technical Analysis

Think of the stock market as a battlefield where buyers and sellers fight for dominance. At any given moment, market greed and fear are reflected in price movements. Learning to read stock charts means understanding this ongoing struggle.

Technical analysis rests on three key principles:

First, current prices already reflect all information—financial statements, news, and fundamental factors—whether publicly known or rumors not yet confirmed. All of this is embedded in the price.

Second, price movements are not random. On a stock chart, you will see clear trends—waves of movement with direction until new forces change the trend.

Third, because humans are consistent, fear and greed drive markets from ancient times to today. This means patterns from the past often repeat today. Recognizing these patterns is crucial to reading stock charts.

Main Tools in Chart Reading: Components You Must Know

Stock charts may seem complex, but if you break them down, they are built from just a few basic elements.

The horizontal axis shows time—this sets the context. The timeframe you choose is very important. Day traders aiming to close positions within a day might look at 5-minute or 15-minute charts, while medium-term investors prefer daily charts, and long-term investors often analyze weekly or monthly charts.

The vertical axis shows price. Advanced traders might see either a linear scale, which displays prices evenly, or a logarithmic scale, which shows percentage changes. Log scale is especially important for analyzing long-term growth stocks.

The bottom of the chart usually displays volume—trading activity. Think of volume as the “fuel” for price movements. Prices can surge, but if volume is low, the move is like a car running out of gas—unable to go far.

Three Types of Stock Charts and Their Characteristics

Although the raw data (Open, High, Low, Close) is the same, how it’s presented greatly influences investor decisions.

Line charts are the simplest, connecting closing prices over time. They clearly show main trends but omit intra-day volatility details.

Candlestick charts, originating from Japan in the 18th century by rice trader Munehisa Homma, display OHLC data with added visual cues—colors and shapes. The body shows the opening and closing prices, while wicks indicate the high and low. Green candles mean close > open; red candles mean close < open. Candlestick charts quickly convey market psychology—buying or selling pressure—making them popular among traders.

How to Read Candlestick Charts: Interpreting the Price Battles

Each candlestick tells a story of the battle between buyers and sellers—who wins, who loses.

The length of the body indicates momentum strength. Long bodies show dominance by bulls or bears; short bodies suggest indecision.

The wicks show rejection of certain prices. A long upper wick indicates attempts to push prices higher that were rejected; a long lower wick shows attempts to push prices lower that were met with buying interest.

Certain candlestick patterns are highly significant:

• Hammer: Appears in a downtrend, with a long lower wick and small body, signaling potential reversal upward.

• Shooting Star: Appears in an uptrend, with a long upper wick, indicating possible reversal downward.

• Doji: Open and close are equal, showing market indecision and potential trend weakening.

• Bullish Engulfing: A large green candle engulfs a small red one, signaling bullish momentum.

• Bearish Engulfing: A large red candle engulfs a small green one, indicating bearish pressure.

Be cautious: beautiful candlestick patterns are meaningless if they occur in the middle of nowhere. They must appear at key support or resistance levels. Also, do not act before the candle closes, and volume should confirm the pattern. Without volume, it may just be a false signal.

Price Trends: The Direction Investors Must Follow

The saying “Trend is your friend” is not an exaggeration. Fighting against the trend is like swimming against the current—you’ll tire out.

An uptrend occurs when prices make higher highs and higher lows, indicating market demand. Prices tend to rise despite occasional dips, which are lower than previous peaks.

A downtrend is characterized by lower lows and lower highs, showing market supply dominance.

The key to effective chart reading is identifying trends early. Trendlines help—by connecting lows in an uptrend or highs in a downtrend—the more touches, the stronger the trend.

Moving averages, like the 200-day EMA (Exponential Moving Average), are also useful. Prices above the EMA suggest a long-term uptrend; below indicates a downtrend.

Support and Resistance: Recording the Battle History

If trend is the direction, support and resistance are the walls that contain price movement. Support is like the “floor”—a price level where buying interest is strong enough to prevent further decline. Resistance is like the “ceiling”—a level where selling pressure tends to cap price advances.

A key tip: view support and resistance as zones, not just lines, because prices often fluctuate around these levels. When resistance is broken, it often becomes support—a principle called role reversal.

Repeated tests of support or resistance without breaking through suggest large orders are holding the level. However, after several attempts (6th or 7th), the wall may weaken, and a breakout could occur.

Effective strategies include waiting for price to test support, observing reversal patterns like hammer, then buying with a stop loss just below support; or waiting for resistance to be tested, watching for shooting star, then selling or shorting.

Hidden Signals from Volume

Traders often say, “Price can be fooled, but Volume cannot.” The relationship between price and volume is called Volume Price Analysis.

Normally, when prices rise, volume should increase—indicating genuine buying interest. When prices fall with increasing volume, it signals strong selling.

Be cautious: if prices go up but volume decreases, the move may be hollow—buying power wanes. Conversely, falling prices with decreasing volume suggest selling pressure is exhausted, and a reversal may be near.

A breakout above resistance must be accompanied by a volume spike to confirm real money entering the market. Without it, it could be a false breakout or bull trap.

Practice Chart Reading with Real Tools

All this knowledge is meaningless without practice. For effective learning, choose platforms with standard global charts.

TradingView is the world’s leading technical analysis platform, allowing you to draw trendlines, add indicators, and practice extensively. It also enables analysis of assets like oil or gold, which often correlate with Thai stocks, deepening your market understanding.

For Thai stocks, Settrade, the official app of the Stock Exchange of Thailand, is the standard. You can see bid/offer data—indicating real market strength. If you observe rapid buy orders filling the bid and a green ticker flow, it shows genuine buying interest.

Learning to read stock charts takes time. It’s not a skill learned in a day. Every time you analyze a chart, memorize patterns, understand the psychology behind them, your expertise gradually increases.

Risk management must always be your shield. Always set stop-loss orders—never move them lower after placing. Do not chase losses. These are all interconnected in surviving the markets.

This knowledge has been used for centuries. In a world where information flows rapidly, understanding the basics of chart reading is more vital than ever. Whether using Settrade for Thai stocks or global platforms, your strength as an investor comes from understanding, not luck. May the methods you’ve studied lead you steadily toward your financial goals. 💸