Understanding The Charts
Charts are where you spent your time. Understand your workspace
Before you place a single trade, you need to speak the language. Charts are where most of your analysis lives, and learning to read them isn’t just useful, it’s non-negotiable. It is important to understand what information is available and how to use it. Let’s analyze each component of a chart.
At the top of every chart, a few details are listed:
The asset name
Ticker symbol (the shorthand code that identifies that specific asset)
Exchange, such as the NASDAQ or CME Group, where the asset is listed, data is sourced, and orders are processed
The timeframe the chart is observing
The market status, including if it is open, closed, or halted, and whether the is up to date
The current trading price, the change since the start of the day, and the percent change of the trading day
The open, close, high, and low of a selected range, typically the most current candle, are also usually displayed here.
Axis Of Time And Price
At their core, traditional linear charts are simple. The X axis shows time, while the Y axis shows price. Price changes are depicted through different units depending on what you are trading.
Stocks are straightforward: dollars and cents.
Futures are quoted in points, where each point represents a fixed dollar value. One point on the E-Mini S&P 500, for example, equals $50. Some futures contracts get a little quirky and quote in fractions rather than decimals. Treasury bond futures, for instance, are priced in 32nds of a point, so a price of 101’16 means 101 and 16/32nds. Grain futures like corn and wheat work similarly, quoted in cents and fractions of a cent per bushel. It looks odd at first, but once you know the convention for your specific contract, it becomes second nature.
Options are quoted as a price per share, but each standard contract represents 100 shares of the underlying asset. So when you see an option priced at $2.50, the actual cost of that contract is $250– that’s the notional value. The number on your screen is always per share, and the 100x multiplier is always implied. Options have a minimum price increment of $0.01, meaning contracts move in penny steps, each penny representing $1 in notional value per contract. A move from $2.50 to $2.51 is a $1 change in what you’re actually paying.
Digital assets are the most straightforward of the group. Crypto is quoted directly in dollars (or your local currency), often down to several decimal places since assets like Bitcoin can be divided into tiny fractions. What makes crypto charts unique is that they trade 24/7, so there’s no official session open or close the way there is with equities or futures. The chart never sleeps, and neither does the price action.
Time zones matter more than most beginners realize. If you’re trading US markets, set your chart to UTC-5, Eastern Standard Time. That keeps you aligned with the New York Stock Exchange and prevents any confusion when news drops or trading hours shift. Being in this time zone allows you to minimize confusion when observing news or modified trading hours.
Multi-Timeframe Market Understanding
Charts can be viewed across different time frames. Time frames from a day-trading perspective can range from one minute to a day. When trading, it is important to consider your specific time horizons and observe charts that fit your needs. The value of differing time frames is the ability to change the resolution of the data that you are viewing. While the one-hour and five-minute charts show the same data, the five-minute chart shows a more zoomed-in perspective, and thus higher resolution of price.
Think about different time frames as observing a bug through a magnifying glass. With your eyes alone, you see the whole bug, but as you look through the lens, you are able to count the tiny hairs on each leg. You are able to see the insect through each scope, but you cannot understand the full physicality of it without considering the view from each lens. Both views are accurate. Neither is complete on its own. The real edge comes from layering time frames together. A higher time frame gives you a broader market context. A lower time frame helps you time entries with more precision. Layering in such a manner builds a more complete picture than either can offer alone.
Candlesticks - A Standard Of Price Interpretation
Candlesticks are the standard way price movement gets displayed on a chart. Each candle represents one unit of your selected linear time frame. On the hourly time frame, a single candle will show data that was presented across one hour. A five-minute candle has the respective amount of data.
Every candle has four data points: the open, close, high, and low. Green (bullish) candles open at the bottom of the body and close at the top. Red (bearish) candles are the reverse. The wicks, or vertical lines on each side of the body, present the overall range of the candle, being the high and low.
Here’s the honest truth about candle patterns: no single candle tells you where price is going next. Pattern recognition alone isn’t statistically reliable enough to trade off. That said, candles still carry useful information when read in context.
For example, observing candle size as a reaction to specific price levels can provide useful insight for your analysis. Basing is where price consolidates at a specific level, over different intervals, or for an extended period of time. These are depicted through a series of compressed candles, often with opens or closes on relevant price levels. This phenomenon can occur near established levels of support or resistance, indicating a potential shift in market balance. Additionally, large-bodied candles following a breakout of a zone of interest can indicate trend strength. In these cases, price expands rapidly over a short period of time, often driven by liquidity shifts or new information entering the market. Of course, these observations need to be paired with complementary data to create quantitatively actionable decisions, but are important to consider nonetheless.
Aside from the limitations of qualitative observation, there is a structural limitation of standard candlestick charts that deserves attention: Market activity is divided into the uniform intervals. Every candle gets the same amount of time regardless of what actually happened within it.
A five-minute candle can represent such a different scale of price, whether it is during a slow Tuesday afternoon or during a Federal Reserve announcement, but is one candle nonetheless. They are not equal. One might contain $2 billion in traded volume and a 40-point swing. The other might contain almost nothing. Linear time-based charting assumes that price action is evenly distributed throughout the day. It is not. Markets expand and contract, almost breathing. They have periods of frenzied activity and long stretches of near-silence. Forcing that uneven reality into uniform time buckets can distort your analysis in subtle but meaningful ways, compressing important moves into tiny candles and inflating insignificant ones. However, there are ways to combat this structural constraint.
Renko Charts: Ignoring Time Entirely
Here, alternative chart types become interesting. Renko charts throw the clock out completely. Instead of plotting price over fixed time intervals, Renko only draws a new block when price moves a defined amount, say, 10 points. If the market grinds sideways for two hours without moving 10 points, nothing gets drawn. The chart simply waits.
The result is a view of price action that’s stripped of noise. Slow, choppy, directionless movement is not even depicted on the chart, as there would be no new candles printed. Strong, decisive moves stand out clearly. What you lose is any sense of time. A single Renko block could represent five seconds or five hours. For some strategies, that tradeoff is worth it. For others, particularly those where timing and session context matter, it’s a meaningful blind spot.
A standard candlestick chart is a journal where you write one entry per hour no matter what. Renko is a journal where you only write when something actually happens. Both tell a version of the story. The question is which version is more useful for the decision you’re trying to make.
Choosing Your Lens
Neither approach is universally superior. Time-based charts anchor you to sessions, news events, and market structure in a way that Renko cannot. Renko cuts through the clutter in a way that time-based charts sometimes cannot. The traders who understand both, and know when to reach for each, are working with a more complete toolkit than those who’ve only ever seen one. There are, of course, other charting methods, Heikan-Ashi, range or volume bars. Each follows the same underlying principle of displaying time and price, and are not relevant for the purpose of understanding the fundamentals of charts.
Overall, price time-series charts have an initially overwhelming amount of information present, but understanding the features on screen is imperative in building skills as a trader. Day traders spend countless hours in these charts. It becomes your environment, your workspace, your thinking room. Curate it like one. Adjust the colors, the layout, the indicators until it feels like yours. Comfort breeds clarity, and clarity is what keeps you sharp when the market starts moving fast. Be comfortable with where you work.
- From the desk of Declan Otañez