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Trading & Risk

Chart Types and How to Read Them

Pomegra Learn

Chart Types and How to Read Them

A chart is your primary tool for reading market activity. Before you can analyze trends, identify support and resistance, or spot reversal patterns, you must first be fluent in the language of charts themselves. This chapter covers the chart types you will encounter most frequently—line, bar, and candlestick—and teaches you to extract every piece of information they contain. You will learn how to interpret the axes, understand the significance of different timeframes, and decide when to use linear versus logarithmic scaling.

The candlestick chart, originating in Japan centuries ago but popularized in Western markets in recent decades, is the most common format you will see. Each candle encodes four pieces of price information: the open, high, low, and close—what traders call OHLC data. The body of the candle shows the distance between open and close; the wicks show the highs and lows that price reached during the period. This dense packing of information makes candlestick charts far superior to line charts for spotting patterns and momentum shifts. But candlesticks are meaningless without context: the timeframe they represent, whether you are viewing a linear or logarithmic scale, and how much volume moved those prices.

Why This Matters​

Before learning to interpret price action, you must train your eye to see price action accurately. A trend that looks clear on a daily chart might vanish on a weekly chart. A dramatic 10% move looks different on a log scale than a linear one. The timeframe you choose determines what patterns become visible and which ones disappear. Professional traders fluidly switch between timeframes—zooming out to see the long-term direction, then zooming in to find precise entry points. Misreading a chart because you selected the wrong scale or timeframe costs real money.

What You Will Learn​

This chapter teaches the mechanics of reading charts. You will understand the anatomy of candlesticks: how to spot a strong close versus a weak one, how wicks reveal rejection at price levels, and what happens when opens and closes align. We will cover bar charts, which provide similar information in a different visual format, and line charts, which strip away detail but can be useful for zooming out to see the macro picture. You will learn the purpose of the time axis and price axis, why logarithmic scaling becomes essential when analyzing stocks over years or decades, and how to select appropriate timeframes for the time horizon you trade.

How to Read This Chapter​

This is a foundational skills chapter. Every concept that follows assumes you can look at a chart and instantly understand what the candles are telling you. Move through the articles sequentially, spending time with the visual examples. If you trade equities over years, you will primarily use daily and weekly charts on linear scales. If you trade options or futures, you might flip between 1-minute, 5-minute, and hourly charts throughout a single trading day. The choice of timeframe determines what you see—and what you see determines your decisions.

By the end of this chapter, you should be able to look at any candlestick and articulate what happened during that period: whether buyers or sellers were in control, where resistance formed, and whether the close was strong or weak. The articles below walk through chart types, candle anatomy, and the critical decision of timeframe selection.

Articles in this chapter​