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Trading Foundations · Lesson 02 of 06

Reading Charts and Timeframes

A price chart shows how an instrument’s price changes over time. In this lesson, you’ll learn to read basic candlesticks and compare timeframes.

In this lesson
Learning journal
Course outline · Lesson 02 of 06
  1. 01Understanding Trading and Risk
  2. 02Reading Charts and Timeframes
  3. 03Identifying Market Structure
  4. 04Building a Trading Plan
  5. 05Position Sizing and Managing Exposure
  6. 06Keeping a Trading Journal
Observe

Each candlestick summarises four prices during a chosen interval:

The four prices in a candlestick
PriceMeaning
OpenThe first price.
HighThe highest price.
LowThe lowest price.
CloseThe final price.

The candle’s body shows the distance between open and close. Its wicks show the extremes. Candle colours depend on your platform settings.

Candlestick anatomy: open, high, low and closeTap image to enlarge
Made-up completed candle: open 100, high 108, low 98, close 106. The body spans 100 to 106; the upper wick reaches 108 and the lower wick reaches 98.
Illustration only, using made-up prices. The body joins open and close; the wicks reach the high and low. This completed candle closes above its open. Colours depend on platform settings. Select the image to enlarge.

An unfinished candle changes as new prices arrive. Wait until its interval closes before treating its final shape as confirmed.

Timeframes group price observations into different intervals. On a one-hour chart, each candle represents one hour. On a daily chart, each candle represents one day.

A short-term rise can occur within a broader decline. Different timeframes provide different context; neither guarantees the next price movement.

The same made-up prices on one-hour and three-hour chartsTap image to enlarge
Two panels show the exact same made-up 08:00-20:00 price series, grouped into twelve one-hour candles and four three-hour candles. Price falls from 120 to 112 overall, while the final three-hour candle rises from 106 to 112.
Illustration only. Both panels use the same made-up prices and the same price scale. Three one-hour candles form each three-hour candle: first open, highest high, lowest low and last close. The shaded final three hours rise within an overall decline. Select the image to enlarge.
Practise

Practical exercise

Open a demo chart and examine ten completed candles.

  1. Record the instrument and timeframe.
  2. Identify the open, high, low, and close of one candle.
  3. Compare the same instrument on two timeframes.
  4. Describe what changes and what remains uncertain.
Download journal
Review · 5 questions

Knowledge check

Write your answers in your learning journal before checking the answer key.

1. What does OHLC mean?

  1. A. Open, high, low, close.
  2. B. Order, hedge, limit, cost.
  3. C. A trading strategy.

2. What do candle wicks show?

  1. A. Guaranteed reversals.
  2. B. The interval’s price extremes.
  3. C. Future prices.

3. Can an unfinished candle change?

  1. A. No.
  2. B. Only its colour.
  3. C. Yes.

4. Can a short-term rise occur within a broader decline?

  1. A. Yes.
  2. B. Never.
  3. C. Only because of a platform error.

5. Does a timeframe alone provide a guaranteed entry signal?

  1. A. Yes.
  2. B. No.
  3. C. Only on daily charts.
Reveal the answer key
  1. A — These are the four prices summarised by a candle.
  2. B — Wicks record the observed extremes.
  3. C — New prices update the candle until it closes.
  4. A — Different timeframes can show different context.
  5. B — A timeframe groups data; it does not guarantee outcomes.