How to Read Stock Charts
Technical analysis is the study of price and volume on a chart to understand market behaviour and plan trades. Rather than predicting, it helps you read what buyers and sellers are doing. This guide covers candlesticks, chart patterns, support and resistance, and the indicators traders actually use.
Key takeaways
- Technical analysis reads price and volume to judge probability, not to predict the future.
- Candlesticks show the battle between buyers and sellers in a single bar.
- Chart patterns and support/resistance frame where a move may start, stall or reverse.
- Indicators add context (momentum, volatility, divergence) – they don’t replace price.
- It pairs with fundamental analysis; FXE teaches both.
Free resources
Try the free PRECIC mini-class to get started.
What is technical analysis?
Technical analysis assumes that price reflects everything known about an asset, and that patterns in price and volume tend to repeat because human behaviour does.
It won’t tell you what will happen. Used well, it helps you weigh probabilities, define risk, and decide where you’re wrong before you enter a trade.
How to read candlestick charts
Each candle shows the open, high, low and close for a period – and the shapes carry meaning.
Reversal up
Hammers and bullish engulfing candles hint buyers are stepping in.
Reversal down
Shooting stars and bearish engulfing candles hint sellers taking over.
Indecision
Dojis and spinning tops show a pause or balance between both sides.
Patterns, levels and indicators
Beyond single candles, three tools do most of the heavy lifting.
Chart patterns
Support & resistance
Indicators & divergence
The FXE method
PRECIC ties these together into one repeatable trade-planning checklist.
Technical vs fundamental analysis
They answer different questions, and many traders use both.
| Technical analysis | Fundamental analysis | |
|---|---|---|
| Studies | Price and volume on the chart | The business, financials and economy |
| Answers | When and at what price to act | What a stock is worth and why |
| Time horizon | Minutes to months | Months to years |
| Best for | Timing entries and exits | Deciding what to own |
Want the other side? See How to analyse a stock.
Learn with FXE
Structured, self-paced courses taught by the FXE founders. Prices in USD.
Technical Analysis Foundations
Learn to read charts and understand technical analysis from scratch.
Ultimate Trading Masterclass
Core technical and fundamental concepts brought together in one structured path.
Learn from traders who teach for a living
FXE has taught technical analysis since 2010, with a 254,000-strong YouTube following and a 4.9-star rating. Every course is taught by the founders.
FAQ
What is technical analysis?
Technical analysis is the study of price and volume on a chart to understand market behaviour and plan trades. It weighs probabilities and defines risk rather than predicting the future.
How do you read a candlestick chart?
Each candle shows the open, high, low and close for a period. The body and wicks reveal who won the period – buyers or sellers – and certain shapes signal possible continuation or reversal.
What is support and resistance?
Support is a level where price has repeatedly stopped falling; resistance is where it has repeatedly stopped rising. These levels frame entries, stops and targets.
What are the best technical indicators for beginners?
Moving averages, RSI and MACD are common starting points, alongside support/resistance. Indicators add context and should support, not replace, reading price.
Does technical analysis work?
It’s a widely used framework for managing probability and risk, not a crystal ball. Evidence is mixed and no method guarantees results. Treat it as a decision tool, not a prediction.