How to Read Stock Charts for Beginners?

Thinking about investing in stocks to grow your wealth? Great! The first step is learning how to read a stock chart. It’s one of the basics every investor should know.

Table of Contents

What’s a Stock Chart?

A stock chart is a visual that shows how a company’s stock price has moved over time. The X-axis shows the time period—this could be intraday, daily, weekly, monthly, or even yearly. The Y-axis shows the stock’s price. Charts also show extra information like trading volume and price changes to help you understand how the stock is doing.

Why is Reading a Stock Chart Important?

Investing in the stock market without knowing how to read charts is like driving blindfolded. If you want to pick good stocks and make smart decisions, you need to learn this skill. It helps you:

Choose winning stocks over time
Know when to buy and sell
See if a stock is in demand or losing interest
Spot price trends—whether prices are going up, down, or staying steady

How do You Read a Stock Chart?

Let’s take an example. Say you look up the stock for ITC.

Stock Symbol and Exchange

In the top-left corner of the chart, you’ll see the company name, its stock symbol (also called the “ticker”), and the stock exchange where it’s listed.

Chart Time Period

You can choose to view how the stock has moved over different time frames—like intraday, daily, monthly, or even across several years.

Short-term traders usually look at daily or intraday data.
Long-term investors look at monthly or yearly charts to spot big-picture trends.

Price Changes: OHLC Data

When you hover over a specific day on the chart, you’ll see something called OHLC data. It shows:

Open: The price when trading started for the day
High: The highest price during the day
Low: The lowest price during the day
Close: The price at the end of the day

You’ll also see something called Net Change—how much the stock moved up or down compared to the previous day. A green number means the stock gained value, and a red one means it dropped.

Types of Charts

There are different ways the data can be shown:

Line chart: Just shows the closing price each day
Bar chart: Shows the OHLC data
Candlestick chart: A popular one!
- A green candle means the stock closed higher than it opened (a gain)
- A red candle means it closed lower than it opened (a loss)
- A long candle body means there was a big price movement that day
- A short candle means the price stayed in a narrow range

Volume

Volume tells you how many shares were traded on a particular day.

Low volume = Not much buying or selling interest
High volume = A lot of people are buying or selling

Why Price and Volume Matter Together

Price alone doesn’t tell the full story. You need to look at price changes and volume together. For example:
If a stock drops or jumps 3% in a day, that might sound scary or exciting. But if the volume is very low, it might just be a fluke. On the other hand, if there’s a big price change and a lot of trading volume, that could signal real interest or panic among big investors.

What’s that Blue Line on the Chart?

That line is called the trend line. It shows how the stock’s price has moved over time, with all its ups and downs.
If you see a clear upward or downward trend, it’s good to dig deeper and understand why that happened. Was it due to company news, global events, or changes in the economy?

You can also add technical indicators like the moving average (e.g., 50-day or 100-day average). This helps smooth out short-term noise and shows the average closing price over a period of time.

Support and Resistance: What are they?

Stock prices often bounce between certain levels.

Support is the lower price level where the stock tends to stop falling.
Resistance is the upper level where the stock struggles to go higher.

If a stock breaks through its resistance level, it might go even higher—usually triggered by news or strong demand. If it falls below its support level, it might drop further.

For example, in the chart of ITC stock from August–September 2019:

The price found support at ₹245.95
It faced resistance at ₹240

(Yes, sometimes support and resistance can flip based on direction and events!)