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School of Trading (education only)

Reading Price Charts: candlesticks, trends, support and resistance (education only)

What you'll be able to do
  • Read line, bar and candlestick charts, and say what one candle tells you.
  • Explain why the timeframe changes the story a chart tells.
  • Describe an uptrend, a downtrend and a range, and draw support and resistance zones.
  • Explain what volume, moving averages and the RSI measure, and where each one fails.
  • Explain what the research says about chart-based trading, and why past patterns do not predict future prices.
  • Practise reading charts every day without using any money.

This course is education only. It teaches how to read charts. It gives no signals, no trade ideas and no recommendations to buy or sell anything, and nothing here says that any chart pattern or indicator "works". Past price movements do not predict future prices. Trading is risky and you can lose money quickly. Practise without real money, and consult a licensed professional registered with your provincial or territorial securities regulator before making any decision with real money. This course builds on 5.5 Trading Basics; take that course first if you are new.

Words in this course 49Open the Vocabulary Hall
01

What a chart can and cannot tell you

In simple words

A price chart is like a diary of a price. It tells you where the price has been. It cannot tell you where the price will go tomorrow, just like your diary cannot tell you what will happen next week.

Key facts
  • Education only. This lesson explains ideas. It is not a recommendation to buy or sell anything.
  • Technical analysis means studying past prices and volume on charts. Fundamental analysis means studying the value of what is being traded (for a company: its sales, profits and debts; for a currency: interest rates and the economy). Many people use both.
  • A chart shows history only. Every chart idea in this course is a way of describing the past, not a promise about the future.
  • What the research says (honestly): a 2007 review by economists Cheol-Ho Park and Scott Irwin looked at 95 modern studies of chart-based trading rules. 56 found positive results, 20 negative and 19 mixed. The authors warned that many studies had problems, such as data snooping (trying so many rules that some look good by luck), choosing rules after seeing the results, and difficulty measuring risk and trading costs. They said profitability could not be considered proven.
  • Every trade has costs (fees and the spread, see course 5.5). A chart idea that looks good before costs can lose money after costs.
A chart CAN show youA chart CANNOT show you
Where the price has beenWhere the price will go next
How fast it movedWhether news will change everything tomorrow
How much was traded (volume)What other traders are planning
Where it turned beforeWhether it will turn there again
WTI oil, daily closes in 2023. The line stops at the last close (29 Dec 2023: $71.89). The empty space on the right is the future; no chart can fill it in.
Step by step
  1. Open any free charting website or the chart in a demo (practice) account. Do not log in to a real-money account.
  2. Type the name or symbol of any large, well-known market into the search box (for example, a big stock index).
  3. Find the timeframe buttons (often labelled 1D, 1W, 1M, 1Y or similar; names can differ by site) and choose 1 year.
  4. Look at the chart for one minute and write three sentences describing only what already happened (for example: "It went up from March to June").
  5. Now try to write one sentence about next month. Notice that you are guessing, not reading.
  6. Check: your three history sentences can be checked on the chart; your "next month" sentence cannot. That is the limit of every chart.
Watch on YouTube
Technical analysis in plain wordsCME Group · YouTube · youtube.com
Fundamental vs technical analysisCME Group · YouTube · youtube.com

Videos by other creators on YouTube, for reference. They are not made by or affiliated with The Future Market.

LESSON 01What a chart can and cannot tell you
LESSON 01 / APP DEMO / AI VOICE00:00 / 01:00
Read the video script
[Host] "A price chart is a diary. It tells you where a price has been."
[Screen: a one-year price chart with the right side blank] "What it can't tell you is what happens on the blank side, the future."
[Text on screen: 95 studies: 56 positive, 20 negative, 19 mixed (Park & Irwin, 2007)] "A big research review found mixed results for chart-based trading, and warned that many studies had serious problems."
[Text on screen: past patterns do not predict future prices] "So in this course we learn to read charts, not to predict them."
[Host] "Reading is a skill. Predicting is a guess. Let's learn to read."
Try it now

Pick one market. Write a five-line "chart diary" for the last year: where it started, its highest point, its lowest point, where it is now, and one big move you can see. Do not write any prediction. Do not place any trade.

ClaudeStuck? Copy a ready-made prompt for Claude

Copy this, open Claude, paste it, and Claude will walk you through the lesson step by step.

For a grown-up: Claude is for adults (18+). Copy this, paste it into Claude, and use the answer to explain the lesson to your child.

I'm learning "Reading Price Charts: candlesticks, trends, support and resistance (education only)" on The Future Market. Lesson 1: "What a chart can and cannot tell you".

What the lesson teaches:
- Education only. This lesson explains ideas. It is not a recommendation to buy or sell anything.
- Technical analysis means studying past prices and volume on charts. Fundamental analysis means studying the value of what is being traded (for a company: its sales, profits and debts; for a currency: interest rates and the economy). Many people use both.
- A chart shows history only. Every chart idea in this course is a way of describing the past, not a promise about the future.
- What the research says (honestly): a 2007 review by economists Cheol-Ho Park and Scott Irwin looked at 95 modern studies of chart-based trading rules. 56 found positive results, 20 negative and 19 mixed. The authors warned that many studies had problems, such as data snooping (trying so many rules that some look good by luck), choosing rules after seeing the results, and difficulty measuring risk and trading costs. They said profitability could not be considered proven.
- Every trade has costs (fees and the spread, see course 5.5). A chart idea that looks good before costs can lose money after costs.
- A chart CAN show you - A chart CANNOT show you
- Where the price has been - Where the price will go next

The exercise I'm working on:
Pick one market. Write a five-line "chart diary" for the last year: where it started, its highest point, its lowest point, where it is now, and one big move you can see. Do not write any prediction. Do not place any trade.

I'm stuck. Please:
1. Explain the main idea in plain, simple words with one everyday example.
2. Walk me through the exercise one small step at a time. Ask me what I've done so far before giving the next step.
3. Don't just give me the final answer. Help me do it myself, and check my work when I share it.
4. This is for learning only. Remind me to check with a licensed professional before I make a real decision about my own money, health or legal situation.
I'm a parent helping my child (about 8 years old) with a lesson called "What a chart can and cannot tell you" from the course "Reading Price Charts: candlesticks, trends, support and resistance (education only)".

Here's what the lesson says:
A price chart is like a diary of a price. It tells you where the price has been. It cannot tell you where the price will go tomorrow, just like your diary cannot tell you what will happen next week.

The activity:
Pick one market. Write a five-line "chart diary" for the last year: where it started, its highest point, its lowest point, where it is now, and one big move you can see. Do not write any prediction. Do not place any trade.

Please explain this so an 8-year-old understands: short sentences, a fun everyday example, and no hard words.
Then give me 3 simple questions I can ask my child to check they understood, and a way to do the activity together, one tiny step at a time.
Keep it general and educational. This is not advice for a real situation.
Open Claude
Sources
My notes
02

Line, bar and candlestick charts

This lesson is part of full access: every course and every level for one payment.

03

Timeframes and trends

This lesson is part of full access: every course and every level for one payment.

04

Support and resistance

This lesson is part of full access: every course and every level for one payment.

05

Volume

This lesson is part of full access: every course and every level for one payment.

06

Moving averages

This lesson is part of full access: every course and every level for one payment.

07

The RSI and the limits of indicators

This lesson is part of full access: every course and every level for one payment.

08

Practise on charts with no money

This lesson is part of full access: every course and every level for one payment.

++

Final project

This lesson is part of full access: every course and every level for one payment.

??

Quiz

  1. What four prices does a candlestick show?

  2. On a common colour setting, what does a green candle mean?

  3. What is an uptrend?

  4. Why must you always say which timeframe you mean?

  5. What is support?

  6. What is a false breakout?

  7. What does volume show, and what can't it show?

  8. Name two ways moving averages fail.

  9. Does an RSI above 70 mean the price is about to fall?

  10. What did the Park and Irwin (2007) review warn about?

  11. What is hindsight bias in chart reading?

EX

Final exam

This lesson is part of full access: every course and every level for one payment.

CE

Certificate

This lesson is part of full access: every course and every level for one payment.