Investing foundations: Lesson 4 of 4
Interested in investing, but unsure what all those lines and colored bars mean? Start with one small task: understand what a chart is showing.
You can follow this lesson without buying a stock, opening an account, or spending money. The example below is entirely made up. There is no need to decide whether to invest while you learn.
Your first goal: recognize the time period, read one candle, and understand the volume beneath it.
What does a stock chart show?
A share is a small ownership stake in a company. A stock chart shows how its share price has changed over time. Dates run along the bottom; prices appear on a vertical scale, usually on the right.
First check the company name, its ticker (the short code identifying the stock), and its exchange or market. Similar names can lead to different investments.
For this lesson, use ordinary Candles. Other chart types can display information differently. You do not need extra indicators or a collection of chart patterns to get started.
What is a candlestick?
A candlestick, often shortened to “candle,” summarizes prices during one chosen period. It has four numbers, sometimes abbreviated OHLC:
- Open: the price at the start of the period.
- High: the highest price during it.
- Low: the lowest price during it.
- Close: the price at the end of the completed period.
These are the basic price fields in TradingView’s chart-data explanation.
The thick rectangle is the body: it connects the open and close. The thin lines extending beyond it are wicks. Their tips mark the high and low. A wick can be absent when an extreme falls at the edge of the body.
Here, the share finished $3 above its opening price, after trading as high as $105 and as low as $98. The candle alone does not tell you whether it reached $105 before or after $98.
Do green and red always mean the same thing?
A common setup uses green when the close is above the open and red when it is below. However, colors are customizable. TradingView also offers a setting that bases color on the previous candle’s close. Check the candle settings rather than relying on color alone.
With the usual open-to-close coloring, a green candle can still close below yesterday’s close. “Up during this period” and “up since yesterday” are different comparisons.
Does one candle mean one day?
Only on a daily chart. The interval, also called the timeframe, determines what each candle covers:
- 1D: one trading day per candle.
- 1W: one trading week per candle.
The dates along the bottom show where those periods fall. Seeing month names there does not mean each candle represents a month. A daily chart can display several months of daily candles. Non-trading days, such as exchange holidays, do not normally add stock-market candles.
The candle at the far right may still be forming. Its latest price, high, low, and shape can change until the period ends. Wednesday’s weekly candle is not a completed week. See TradingView’s interval guide.
What do the numbers beside the chart mean?
Read the currency label first. USD means US dollars; JPY means Japanese yen. A price of 100 means 100 units of the displayed currency per share.
On a regular, or linear, scale, equal vertical distances represent equal price differences. On a logarithmic scale, equal distances represent equal percentage changes: 100 to 200 and 200 to 400 both double.
TradingView’s scale settings also include percentage displays. Check the labels before reading a number as a cash price. Zooming and scaling can change how dramatic a move looks.
What are the bars below the price?
They often show volume: how many shares traded during each candle’s period. A daily volume bar belongs to that day; a weekly bar covers the week. TradingView’s Volume guide explains that stocks use shares, while futures use contracts.
For ordinary stock volume, 2M means two million shares traded, not two million dollars or two million different people. A taller bar means more shares traded than a shorter bar on the same scale.
Compare completed periods. A partly finished day has had less time to accumulate volume. High volume alone does not tell you whether to buy.
How can I try this on TradingView?
For a walkthrough of the controls, see how to set up your first TradingView chart, including symbol search, intervals, data checks, and saving a layout.
When you want to explore a chart, search for a familiar listed company and verify its name and market. Choose Candles from the chart-type menu and 1 day from the interval menu. Find one completed candle and read its OHLC values. Then switch to 1 week and notice how much history each candle contains.
Choosing a familiar company is an observation exercise, not a recommendation to buy it. You can also stay with the diagram above.
Can you answer these three questions?
Use the hypothetical daily candle above. Imagine its volume bar reads 2M.
- What period does this candle summarize?
- Where did the price open and close, and what were its highest and lowest prices?
- What does 2M of stock volume mean?
Check: One trading day. Open $100; close $103; high $105; low $98. Two million shares traded during the period.
On your next chart, ask the same three questions. Understanding those details is a useful first step.
Can a chart tell me whether a stock is a good investment?
A chart helps you describe price history. It cannot prove that a stock is cheap, safe, or about to rise. A $10 share is not automatically better value than a $100 share: companies have different numbers of shares. Market capitalization considers share price and shares outstanding.
Understanding the business, its finances, the price you pay, and your ability to bear losses requires further work. No candle or indicator guarantees future returns. Learning to read a chart does not commit you to trading.
A chart price does not guarantee the price of a new trade. Learn the difference between market and limit orders with a fictional example.
For the business side, use the step-by-step stock-analysis framework.
What should I learn next?
When these basics feel familiar, try the simple weekly chart-review guide. Later, explore moving averages, RSI, or MACD lines and histogram, one at a time. There is no need to add everything at once.
Keep the three practice questions handy. They are a starting point you can return to whenever a chart feels crowded.
For education only. Examples are hypothetical and are not investment recommendations.