Module 4: Reading charts
A price chart is a drawing of the past. Learning to read one helps you ask better questions about a share. It does not tell you what happens next. All shapes and numbers below are made up to teach the idea.
How it connects. Ratios tell you what a company is worth on paper. Charts show how its price has behaved.
1. What a price chart shows
What it is. A price chart plots a share's price going up the side against time going across. A line chart joins one price per period. A candle chart shows four prices for each period: open, close, high and low.
Tap or hover a picture to see what it means.
One candle packs a day's open, close, high and low into one shape. Made-up prices.
Where to find it. On a stock's page on NSE or BSE, on free charting websites, and inside your broker's app. All of them let you switch between line and candles.
How to read it. Choose the time span first. A 1-day, 1-year and 5-year chart of the same share tell very different stories. In a candle, the thick body runs from open to close. The thin wick reaches the day's high and low.
Common trap. A short zoomed-in window makes small moves look dramatic. Always check the price scale on the side, and look at a longer span before you judge.
Try it. Open one stock's chart for 1 month, 1 year and 5 years. Write down one thing that looks different in each.
2. Trend, support, resistance and volume
What it is. A trend is the general direction of price. In an uptrend the peaks and dips both keep rising. Support is a floor where price stopped falling before. Resistance is a ceiling where it stopped rising. Volume is how many shares traded.
An uptrend: each peak and each dip sits higher than the one before. Tall volume bars mean many shares changed hands.
These are zones where buyers or sellers showed up before. They are not guarantees. Made-up shape.
Where to find it. The same charting tools show volume bars under the price. Most also offer a moving average, which is the average of recent closing prices drawn as a smooth line that hides daily noise.
How to read it. Treat support and resistance as zones, not exact lines. A move on heavy volume carries more weight than the same move on thin volume. A moving average helps you see direction through the noise.
Common trap. Lines drawn on an old chart always look obvious in hindsight. Levels break often, so a line you draw is a question to ask, not a promise.
Try it. On a past chart of one share, mark two spots where price turned. Did it turn near the same level again later?
3. What charts cannot tell you
What it is. A chart records what already happened. It does not say why price moved, and it cannot say what comes next.
A chart records what already happened. It cannot show you which future path will happen.
Where to find it. The reasons live elsewhere: the company's results (Module 2), its ratios (Module 3), and the day's news. A chart only shows the effect.
How to read it. Use a chart as a map of history. Pair it with the company's facts. When price moved sharply, look up what happened that day.
Common trap. “It looks just like last time” is a feeling, not a forecast. Patterns that seem clear afterwards fail often in real time. Nobody can promise where price goes.
Try it. Pick one big jump or fall on a chart. Find the result, news or event from that day and write one line linking them.
Try it live
Draw a zone where price turned twice, then add SMA 50.
Practice lab
Do these on the real site. Tick each one when done. 0 of 3 done
Disclaimer: WealthyTrees is for education only. Nothing here is investment advice or a recommendation to buy, sell or hold any share or product. Numbers and examples are made up. WealthyTrees is not a SEBI-registered investment advisor. Please speak to a SEBI-registered advisor before you invest.