Skip to content
Read the Market
FR

Chapter 00

The basics

Read a candle, a timeframe, and recognize market structure.

12 min read

Why price moves

A market is an order book. At every moment, some people want to buy at a certain price and others want to sell at a certain price. As long as they keep finding each other, price doesn’t move much.

Price moves when there’s nobody on the other side. If every seller available at 20,000 has been filled and buyers remain, price has to rise to find sellers higher up. That’s the whole mechanism, and it’s the only idea to keep from this chapter.

Hold on to that phrasing, because the rest of the course follows from it: price travels toward the places where there are orders to fill. The question in every chapter after this one will simply be where those orders are.

The candle

A candlestick chart cuts time into equal slices. Each slice produces a candle that sums up four prices: the open, the close, the highest price touched and the lowest price touched.

A candle sums up four prices over a fixed period
highcloseopenlowbullishhighcloseopenlowbearish
bodyThe filled rectangle runs from open to close. Its size shows how far price actually moved.
wickThe thin line reaches the extremes that were touched. It shows where price went, then where it was turned away.
greenThe close is above the open: buyers had the last word for the period.
redThe close is below the open: sellers had the last word.
A 5-minute candle and a daily candle read exactly the same way. Only the length of time they sum up changes.

The wick is more instructive than the body. A body tells you what happened; a long wick tells you price tried to go somewhere and was refused. That refusal is information, and you’ll use it constantly from chapter 01 on.

Timeframes

The same market can be viewed in 1-minute, 15-minute, 4-hour or daily candles. These aren’t different markets, they’re zoom levels on the same price.

Pick the zone from far away, take the entry up close
ZONE HTF
HTFHigher timeframe (4h, 1h). It gives the direction and the zones that matter.
LTFLower timeframe (5m, 1m). It’s only used to place the entry inside the zone you already chose.
The classic mistake is deciding direction on the 1-minute chart. The lower timeframe decides nothing: it refines.

The method taught here uses both ends and nothing in between: higher timeframes to decide where and which way, lower ones only to decide when.

Market structure

A trend isn’t an impression, it’s a definition. It’s up when highs and lows are both rising. It’s down when both are falling. When they’re doing neither, there’s no trend, and that’s information too.

An uptrend comes down to two conditions
HHHHHLHL
HHHigher high: each peak clears the previous one.
HLHigher low: each trough holds above the previous one.
As long as both hold, the trend is intact. A downtrend is the exact mirror image and reads the same way.

Being able to name the structure prevents half of all bad trades: you stop buying because “it looks like it’s going up” and start buying because the structure is bullish and stays that way.

BOS and CHoCH

Two breaks share almost the same shape and mean the opposite. Telling them apart is the first real technical reflex to build.

Two breaks that look alike and mean opposite things
BOSCHoCH
BOSBreak of structure: price breaks in the direction of the trend, and the trend continues.
CHoCHChange of character: price breaks the last protected low, the first sign the trend is turning.
A BOS confirms what was already happening. A CHoCH is the only one of the two that announces something new, which is why it’s the one to watch.

The bare minimum of vocabulary

The course takes its examples from NQ, the futures contract on the Nasdaq 100 index. Three words are enough to follow along.

  • Point: NQ’s unit of price movement. When we talk about a 20-point stop, that’s the unit.
  • Contract: the quantity bought or sold. The number of contracts sets what a point is worth to you, and so how much you lose if the stop is hit.
  • R: a trade’s risk used as the unit of measurement. A trade that makes twice what it risked is a 2 R trade. It’s the only honest way to compare trades of different sizes.