Chapter 1 of 4
Reading a price chart
Learn OHLC bars, timeframes, adjustments and the difference between observing a chart and predicting a return.
In this chapter
A chart is an organized record #
A price chart maps observations to time. A line chart may connect closing prices; an OHLC bar or candlestick displays open, high, low and close within an interval. The same raw trades look different when aggregated into one-minute, daily or weekly intervals.
A candlestick’s body shows the difference between open and close, while the range extends from high to low. The high and low do not reveal which happened first. Two very different intraperiod paths can produce the same candle.
Check what the data actually means #
Identify the venue, symbol, currency, timestamp, timezone and whether prices are adjusted for corporate actions. A split can create a mechanical price change in an unadjusted series. Missing bars, stale quotes or an illiquid last trade can create misleading patterns.
For futures, a continuous chart can combine different expiry contracts according to a roll rule. The resulting visual series is not necessarily a position that could have been held without roll transactions. Back-adjustments may change historical price levels.
Context before interpretation #
A trend or pattern is a description constructed from past data. It does not reveal the next participant’s order or the next unexpected announcement. Any analytical rule should define its timeframe and the information available at the time of the decision.
The following technical-analysis module explains tools as hypotheses that need evidence. Paper examples use fictional figures rather than recent security-specific recommendations. Avoid treating a drawing as a promise or a reason to ignore exposure and execution risk.
Decision lab: The same bar can conceal different sequences #
An OHLC bar has open 100, high 110, low 95 and close 108. A strategy with a stop at 97 and target at 109 cannot determine which boundary was touched first from that bar alone. A favourable assumed sequence can create imaginary backtest gains.
Specify the observable signal time and the earliest possible fill. Use finer data or a conservative ordering rule for ambiguous bars, and keep it unchanged across the sample. Contrast a close-confirmed signal with a claimed entry at an earlier intrabar low.
Hypothetical worked example
One candle cannot show the sequence
A fictional daily candle has open 100, high 110, low 95 and close 105. The market could have reached 110 before 95, or 95 before 110. A strategy that assumes one particular sequence from the daily candle may invent a fill that never occurred.
If a split doubles the number of shares and roughly halves their reference price, an unadjusted chart can show an apparent 50% fall that is not an equivalent destruction of shareholder value.
Ask whether adjusted data, intraday data or a conservative fill assumption is required before interpreting an example. Data preparation is part of the analysis, not a cosmetic step.
Common mistakes
- Mixing adjusted and unadjusted historical prices.
- Assuming a candle reveals whether a hypothetical stop or target happened first.
What information is absent from a single OHLC candle?
Make this chapter useful
Can you defend the reasoning?
Before moving on, answer the self-check in your own words and write why each alternative fails. Use the worked example to test that explanation. Then apply it in the module research task; keep the assumptions and the evidence that could change your answer.
Sources and further reading
Further-reading references from the curriculum source list. Contract sizes, expiry calendars, settlement references, margin parameters and tax treatment can change; verify the current operative documents for the actual product. Worked figures are illustrative, not current quotes.
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General financial education. No securities recommendation, assured outcome or personal advice. Read the risk disclosures.