How to Read Forex Charts: Candles, Pips and a Practice Drill

A forex chart shows the exchange rate of one currency against another over time. To read it, identify the currency pair, check the timeframe and timezone, then read each candle's open, high, low and close. After that, you can describe price changes without needing an indicator to tell you what happened.

Let's use EURUSD and work through an example. All example prices in this article are illustrative.

Read the pair before reading the pattern

In EURUSD, EUR is the base currency and USD is the quote currency. A price of 1.0800 means one euro is quoted at 1.0800 US dollars. A rise to 1.0820 means the euro has increased in value relative to the dollar over that interval.

Switching to USDJPY changes the interpretation: the number tells you how many yen one dollar buys. The same upward candle now describes the dollar strengthening against the yen.

That is why “the dollar went up” is not enough information to describe a forex trade. Name the pair and the direction.

Check three labels on every new chart

Before marking a level, find:

1. Symbol: EURUSD, GBPUSD and XAUUSD describe different instruments. XAUUSD is gold quoted in dollars, not a currency pair with the same position-sizing convention as EURUSD.
2. Timeframe: each five-minute candle summarizes a five-minute interval; each hourly candle summarizes an hour. Changing the timeframe changes what one bar contains.
3. Timezone: 08:00 UTC and 08:00 New York time are different moments. Daylight-saving changes can also move the relationship between local sessions and UTC.

If your chart data has gaps, distinguish missing data from a period when the selected market was closed. Do not automatically turn an empty interval into a trading signal.

Read one candle in plain language

Consider this hypothetical EURUSD candle:

The body runs from 1.0800 to 1.0810. The wicks extend to the high and low. Because the close is above the open, many chart themes display a green or hollow candle; color conventions can be changed, so the numbers are the reliable reference.

You can say that price finished ten pips above the open and traded through a thirty-pip high-to-low range. You cannot tell from this candle alone whether it visited the high before the low. That matters when both a hypothetical stop and a target sit inside the bar.

The last candle on a running chart may still be forming. Its close, body and wicks can change until the interval finishes. Treat a “close above resistance” rule as unconfirmed while that candle is open.

Understand pips without confusing them with profit

For most conventionally quoted currency pairs, one pip is 0.0001. For many JPY pairs, it is 0.01. OANDA's pip explanation gives examples. Check the particular instrument's specification; the smallest quoted increment can be smaller than one pip.

On EURUSD, a move from 1.0800 to 1.0820 is 20 pips. That does not tell you the dollar profit. Position size, account currency and costs are still needed.

There is another price distinction: a chart may display bid, ask or midpoint data. A spread separates executable buying and selling prices. Two platforms can therefore show slightly different candles without either necessarily being broken. Record the feed convention when you compare results.

Describe structure before predicting direction

Choose a short section of chart and mark visible turning points. If the later highs and lows both rise, you can describe that section as an uptrend. If price repeatedly returns between two boundaries, you can describe a range.

Those are descriptions of the observed section. They do not guarantee the next candle's direction.

Use a consistent definition for a turning point. If your rule requires two completed candles on the right to confirm a swing, the turning point becomes known two candles later. That distinction prevents a clean historical chart from giving you information you would not yet have had.

The market structure guide goes deeper into swing highs, lows and changes in structure. You do not need to label every small movement to benefit from the exercise.

A fifteen-minute chart-reading drill

Use historical replay so the next candle stays hidden. This exercise is about describing observations, so placing a trade is optional.

First five minutes: pick one pair and one timeframe. Write the pair's meaning, timezone, conventional pip size and whether the current candle is complete. Read the last three completed candles aloud: open, high, low, close.

Next five minutes: mark one visible high and one visible low. Before revealing each new candle, write one sentence such as “price is still inside the marked range.” After revealing it, update the sentence using only what changed.

Final five minutes: choose one potential entry and stop. Calculate their distance in pips. Explain which additional inputs you would need to convert that distance into monetary risk. Record any candle whose internal price sequence you cannot determine.

A useful journal entry can be as short as: “I treated the forming candle as finished; the close later moved back inside the range.” That gives you something concrete to improve tomorrow.

Move from reading candles to testing a rule

Once you can explain a chart without guessing its labels, try a single written setup. Keep the timeframe fixed and record every qualifying occurrence. The manual EURUSD backtesting walkthrough turns the observations from this drill into a complete exercise.

For a first exercise, open a free TestMax account and select an available forex pair such as EURUSD. Use a supported minute timeframe, reveal a few candles, and practice describing what you can actually see. The Free plan includes a limited recent history window; check current plan details before choosing a longer project.

Reading a chart well means knowing both what it shows and what it leaves out. That is a useful skill even on a day when you decide to take no trades.