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How to Read Candlestick Charts?

How to Read Candlestick Charts?
June 7, 2019 Martha Stokes CMT

How to Read Candlestick Charts?

List of 5 Tips About Price Revealed

A skill that all traders need to hone and strive to improve constantly is how to read candlestick charts. Candlestick patterns of price matter. What price is doing tells a great deal about which Market Participant Groups are controlling price.

The chart example below shows price underlined on the left, at an extreme Angle of Descent™ into the lowest low before a bottom commences.

Even as this final sell down occurs, it is obvious that the steepness of the Angle of Descent is unsustainable. In addition TechniTrader Quiet Accumulation Indicator TTQA in the bottom chart window with red bars, is exposing Smaller Fund capitulation as the stock tumbles.

Understanding how to read candlestick charts is important, in that realizing 5 Tips about price are revealed when you know who is in control of price.

List of 5 Tips About Price Revealed is below:

  1. How price will behave
  2. How price will react to support and resistance
  3. How long price will move in that pattern
  4. What to look for ahead of sudden price moves
  5. When a bottom or top is underway

In learning how to read candlestick charts, see the sideways candlestick pattern after the low which is indicative of the Giant Funds buying in incrementally with controlled bracketed orders in Dark Pools over time. Since some Retail Traders and High Frequency Traders are still trying to Sell Short against the strength of the Giant Funds buying, the up and down day to day price candlestick pattern forms.

Then as the stock moves up to the first tier of resistance around 35-37, the High Frequency Traders realize that Dark Pool buying by the Giant Funds has been going on. So they rush to buy in quickly creating a buzz in the Retail Trader world, and short-term Swing Style Trading occurs. At this time the Giant Funds have accumulated what they wanted, and so the news spreads of their buying.

This creates speculative runs due to emotional At Market buying by Smaller Funds. The stock runs up, and then hits stronger resistance where it stalls. Momentum evaporates and the stock moves sideways in a Platform candlestick pattern, which has a box drawn around it to assist in learning how to read candlestick charts.

It could have just as easily started to move down in a correction. It did not because as profit taking began by the High Frequency Traders and other Professional short-term Swing Traders, the Giant Funds buying in Dark Pools entered again controlling price tightly with their orders off the exchanges.

Platforms are a “value-oriented” Market Condition where the dominant buyers are Giant Funds buying large lots incrementally over time in Dark Pools. This is usually based on Earnings Reports.

The stock slides downward during the latter part of the sideways action. However the Giant Funds are not selling but rather they have stopped their accumulation, and a void of buying by these huge lot purchasers causes a slip-slide action.

But if you study the slip down action closely you will see that the stock stops just at the lowest low of the Platform, see the first red arrow on the right showing the lowest low. In understanding how to read candlestick charts this indicates that the Giant Funds stopped buying, then as the stock slipped to the low range their buying started again briefly as indicated between the middle and left red arrows.


The shift of trendline patterns throughout this candlestick chart show learning how to read candlestick charts is about recognizing where one Market Participant Group started and stopped buying the stock, and a different Market Participant Group took control of price.

By understanding that the upward trend cycle has many different tiers and layers of a variety of Market Participant Groups, you can quickly identify which of them control price at what time. When you learn to recognize who controls price you will know how price will behave, and that tells you what to expect next.

Go to the MetaStock Learning Center and watch training webinars Trade Management Planner, Velocity Swing Trading, High Frequency Trader Action, and Explorations Beyond the Basics.

Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses

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Martha Stokes, CMT is co-founder and CEO of TechniTrader. She is a retired professional Buy-Side Analyst and was awarded the Chartered Market Technician designation for her thesis, "Cycle Evolution Theory." Martha is a passionate teacher of the financial markets and a prolific writer, having created over 40 stock, option, and financial market courses.