Charts, Candles and Timeframes: How Traders Read Price
A price chart is the trader's primary tool. Candlestick charts show you four critical pieces of information per period in a single visual bar. Here is how to read them — and how the timeframe you choose changes everything.
Before indicators, patterns, or strategies come into play, you need to be able to read a price chart. A chart is a visual record of what a market has done over time. The most widely used chart type is the candlestick chart — and once you understand it, you will wonder how anyone made sense of markets without it.
Three Chart Types
| Chart type | What it shows | Used for |
|---|---|---|
| Line chart | Only the closing price connected by a line | Quick overview, news sites, long-term trends |
| Bar chart | Open, High, Low, Close as a vertical bar | Common in some professional platforms |
| Candlestick chart | Open, High, Low, Close in a visual candle shape | Most popular — used by the vast majority of traders |
Anatomy of a Candlestick
Each candle represents a fixed period of time and contains exactly four prices:
- Open — the price when the period began
- High — the highest price reached during the period
- Low — the lowest price reached during the period
- Close — the price when the period ended
The thick rectangular part of the candle (the body) spans from the Open to the Close. The thin lines extending above and below the body are called wicks or shadows, and they show the High and the Low.
Green Candle vs Red Candle
If the Close is higher than the Open, the candle is green (or white on some platforms) — buyers won that period. If the Close is lower than the Open, the candle is red (or black) — sellers won. The bigger the body, the stronger the move in that direction.
What the Wicks Tell You
The wicks reveal rejected prices. A long upper wick means the price rose significantly during the period but then got pushed back down before the close — sellers fought back. A long lower wick means the price fell sharply but then recovered — buyers stepped in. Wicks are where the battle between buyers and sellers is most visible.
Reading a Single Candle
A candle opens at $100. During the period, it reaches a high of $108 and a low of $97. It closes at $104. Result: green candle with a body from $100 to $104. Upper wick from $104 to $108. Lower wick from $100 to $97. Interpretation: buyers were in control overall (green), but the upper wick shows sellers rejected the push above $108.
What Is a Timeframe?
The timeframe is the time period each candle represents. On a 5-minute chart, each candle shows the Open, High, Low and Close for one 5-minute window. On a daily chart, each candle represents an entire trading day. The chart looks completely different depending on which timeframe you choose — even for the same stock on the same date.
| Timeframe | One candle represents | Typically used by |
|---|---|---|
| 1 minute (1M) | 1 minute of trading | Scalpers — very short trades |
| 5 minutes (5M) | 5 minutes of trading | Short-term intraday traders |
| 15 minutes (15M) | 15 minutes of trading | Intraday traders — common for entries |
| 1 hour (1H) | 1 hour of trading | Swing traders looking for daily moves |
| 4 hours (4H) | 4 hours of trading | Swing traders, multi-day setups |
| Daily (1D) | One full trading day | Swing traders, position traders, investors |
| Weekly (1W) | One full trading week | Long-term investors, macro view |
Which Timeframe Should You Use?
There is no single correct answer — it depends on how long you intend to hold a trade. But there is an important principle: always look at a higher timeframe first to understand the bigger picture, then drop down to a lower timeframe to find your entry.
The Multi-Timeframe Approach
Use the daily chart to understand the trend — is the stock going up, down, or sideways overall? Then use the 1-hour chart to find the right zone to enter. Then use the 15-minute chart to time your exact entry. This is called a top-down analysis and it is used by most professional traders.
The Problem With Very Short Timeframes
The shorter the timeframe, the more noise you see. A 1-minute chart is full of random, meaningless price movements — a price tick here, a small spike there. It is very hard to tell signal from noise. Beginners who start on 1-minute charts often overtrade and get chopped up by random movements.
Start With the 15-Minute or 1-Hour Chart
If you are new to reading charts, the 15-minute or 1-hour timeframe is a good starting point. It shows enough detail to make meaningful decisions, without the frantic noise of 1-minute or 5-minute charts. Once you are comfortable, you can layer in other timeframes.
Volume Bars on a Chart
Most chart platforms display volume bars along the bottom of the chart. Each volume bar corresponds to a candle and shows how many shares were traded during that period. When a candle has a large body and is accompanied by a tall volume bar, it means the move had strong participation — it is more meaningful than the same sized candle on very low volume.
Key Takeaways
- A candlestick shows four prices: Open, High, Low and Close (OHLC) for a specific time period.
- A green (or white) candle means the price closed higher than it opened. Red (or black) means it closed lower.
- The wicks (thin lines above and below the body) show the high and low reached during that period.
- The timeframe determines what period each candle represents — a 1-hour chart shows one candle per hour.
- Longer timeframes give the bigger picture. Shorter timeframes show detail — but also more noise.