From candles to confident setups.
Seven focused lessons covering how to read charts, recognise the patterns that actually matter, use indicators without over-fitting, and size every trade so one loss never breaks the account.
Day-trading basics
Start with what day trading is, when the market actually moves, and how to pick a time frame that matches your style.
How price moves up and down
Every tick on a chart is a single trade. Price ticks up when a buyer is willing to pay the lowest asking price — and ticks down when a seller hits the highest bid.
Last trade
Price isn't a number the exchange decides — it's the price of the most recent trade. Each tap simulates one more participant willing to buy or sell. When one side outnumbers the other, the next trade has to happen at a slightly worse price for them — and the tape ticks up or down.
Step 1 of 6 · The order book
Every stock has an order book — a list of who wants to buy (bids) and sell (asks), and at what price. The best bid here is $100.04; the best ask is $100.06. The 2¢ gap between them is called the spread.
Trade tape
No trades yet.
Knowledge check
Price just ticked from $100.06 to $100.07. What most likely happened?
Reading a candlestick chart
Every candle tells a small story: who controlled the period, how decisively, and how far price travelled before settling.
Close above open — buyers were in control during this period.
Click the body, wicks, or the Open/Close labels to see what each part of the candle tells you.
Common candle patterns
A handful of patterns repeat often enough to be worth memorising. Two of the highest-quality reversals are the bullish engulfing and the hammer.
Bullish engulfing after a pullback
Hammer reversal at the bottom
Knowledge check
A bullish engulfing pattern is most reliable when it appears…
Trends, support & resistance
Markets move in trends or ranges. Drawing the levels where price has reversed before is the simplest way to plan entries and stops.
Knowledge check
Price has bounced off $200 three times and finally breaks above $211. What's the most useful interpretation?
Key indicators
Two indicators carry almost all the weight: a moving average for trend context, and RSI for momentum. Try the sliders below — see how the period changes everything.
Smooths recent closes into a single trend line. Shorter periods react faster but produce more whipsaw; longer periods are slower but capture the bigger trend.
Measures speed and change of price moves on a 0–100 scale. Above 70 is typically considered overbought; below 30 oversold. Latest: 86 — Overbought.
Knowledge check
Why does shortening the RSI period (e.g. from 14 to 7) make it 'noisier'?
VWAP — the institutional benchmark
The Volume Weighted Average Price is the single most-watched intraday line. It's the average price every share traded today, weighted by how many shares traded at each price — the level desks measure their fills against and the magnet price tends to revisit.
Plain English: VWAP is the volume-weighted average of every trade since the open. Multiply each bar's typical price (high + low + close, divided by three) by its volume, sum those, and divide by total volume.
VWAP = Σ(typical_price × volume) / Σ(volume)
Because volume is the weighting term, prices traded on heavy volume pull VWAP toward them and prices traded on thin volume barely move it. That's why VWAP behaves so differently from a simple moving average — it's measuring where the money actually changed hands, not just where the chart was.
Anchored at the 09:30 ET open. Resets every session. This is the line institutions benchmark their fills against.
Drag to re-anchor from any bar — earnings, a swing low, a gap. The line evolves bar-by-bar from that point onward.
Notice the U-shape — heavy at the open and close, light midday. High-volume bars drag VWAP toward their price; thin bars barely move it.
How to actually trade with it
- Trend filter. Only take longs when price is above VWAP, only take shorts when it's below. One rule, removes most bad trades.
- Reclaim / loss entries. Price closing back above VWAP after sitting below it is a classic long trigger. The reverse is a short trigger.
- Mean-reversion fade. When price stretches 1–2% from VWAP on heavy volume into a level, expect a fade back toward it — that's exactly where institutional algos like to buy or sell.
- Anchored VWAP. Anchor at an earnings bar, a gap-up open, or a major swing low. The resulting line evolves bar by bar and often acts as the level price respects for days or weeks.
- Pitfalls. VWAP becomes less reactive late in the day (denominator is huge) and is noisy in the first 5–10 minutes (sample is tiny). It also resets every session — don't expect yesterday's level to matter today.
Knowledge check
On a strong trending day, price keeps pulling back to VWAP and bouncing. What's the most likely explanation?
Risk management
Most traders blow up not because their setups were bad but because their size was wrong. Decide the loss before you take the trade.
Position plan
Rule of thumb: aim for at least 2:1 reward-to-risk so winners pay for losers. Cap risk at 1% of your account per trade so a losing streak doesn't sink you.
Knowledge check
Your account is $25,000, you risk 1% per trade, and your stop is $2 below entry. How many shares should you buy?
Putting it together
A real setup uses everything above at once: a clean trend, a level, a confirming candle, and a pre-defined entry, stop, and target.
Trend was up. Price pulled back to a prior level. A green candle confirmed the bounce — that's the entry. Stop sits below the pullback low (where the idea is wrong). Target sits at the prior swing high. Reward-to-risk on this one ≈ 3.5 : 1.
Knowledge check
Why is the stop placed just below the pullback low?