The trading chart has key information you always want to keep an eye on. The white arrow pointing down shows where you can find time, and the white arrow pointing to the right shows where you can find price.

The pink arrow is pointing to the current time of the open candle and the candle timeframe. In this example, M15 means this is a 15 minute chart. Every candle has 15 minutes before it closes and a new candle opens.

The yellow arrow is pointing to the Japanese candlesticks. All of this information is used to build trading ideas as you speculate on price. I will show you how price and time relate to the candles as we go through how to read them.

If a candle is green, that means price is higher than where it started when that candle opened. If the candle is red, that means price is lower than where it started.

While the candle is still open, meaning the time for that candle has not expired yet, it can switch between green and red depending on where price is compared to the candle’s starting point. Once the candle time expires, the candle closes and keeps the color based on where the final price ended compared to where it started.

The white arrows are pointing to the starting points of the candles, and the yellow arrows are pointing to the ending points. The faint pink lines show the highest and lowest prices that were reached while each candle was open.

What you are looking to do with candlesticks is follow price into high quality target areas. What can be confusing is knowing when to follow price directly and when to follow the structure price is creating.

The white line is following price, while the yellow line is following structure. Both can give you useful information, but structure usually helps you understand the bigger idea behind the move instead of reacting to every candle by itself.

The white rectangles mark the lows of the price run structure. We know that because of the volume move that happened before them. After that strong red candle, a green candle printed. Then, after the green candle, price did not break the low of that green candle. That detail alone lets me know that chasing a steep move is probably not the play.

At that moment, the only real information I have is the last low that was created near the first white rectangle. From there, I am watching the candle structures near that price point area. Keep in mind that just because price runs does not mean you should automatically enter. When the first white rectangle low gets crossed, that would signal me to start looking for the last best zone price moved from. Basically, I am looking for the last low that had a significant volume from it.

That means the second white box would not be my main focus. The red box is a potential structure area because of the move from the first white rectangle. Before price retraced back into this zone, I would be looking to see if price touched the low of the first white rectangle, or moved slightly above it, then start printing strong body red candles.

As you study this for yourself, you may find that it is not always best to have one exact price in mind with your trading zones. We will talk more about that in later sections.

The blue rectangle would be another low I would be looking to trade through, and it would be the first good target from the first red rectangle structure zone. If you analyze the candle run from the first red rectangle, you can see how price confirms the first red candle off the structure zone. Can you identify which candle I’m talking about?

So at that point in time, any trader trading this setup would have seen a strong volume move before the price run. After price retraced to the low of the first price run, the trader then got price confirmation from a preselected zone.

What I like to do is avoid entering price run trades that are not coming from structured zones. One way I do that is by staying away from chasing steep market structures. A steep structure would look more like the white line. I prefer to see shapes like that after I am already in the trade, not before I enter.

Understanding this can help with your discipline on the chart. Traders tend to spazz out more when they do not understand what they are seeing but continue to force trades anyway. That can be scary because it is hard to notice when you are doing it if you are trading alone.

Another reason to join my trading community. 🙂

Let’s move on.

There are many time frames you can choose from. A very popular technique is called top down analysis. This is the skill of getting an understanding of the bigger idea first, then looking for an entry on a lower time frame of the same chart.

Look at how the 15 minute chart below compares to the 5 minute chart. The higher time frame helps you see the overall structure, while the lower time frame gives you a closer look at the entry opportunities inside that structure.

Here’s a breakdown of why this is so powerful.

Look at the yellow zone from the 15 minute chart and compare it to the structure on the 5 minute chart. From the 15 minute chart, we can see that price is in a ranging market. The 15 minute chart also presents a bullish engulfing candle, and the teal vertical line marks a possible entry opportunity.

The yellow line on the 15 minute chart marks the max retracement area from the price run that I am willing to accept structure from. The red rectangle is my reassessment zone. If price hits that zone, I go back into observation instead of forcing the trade.

Now look at how the lower timeframe structure complements the target we are aiming for. Pay attention to the move that came from the yellow zone. You should notice the strong sell that came from that area, which created about an hour and a half of strong selling movement.

With all of these factors lining up, trading back toward that zone is ideal for my type of entries. How close you like to be to price will help determine the trade time you choose.

This will make more sense in the next section.