How to analyze trading charts: a 5-step process with an example

To analyze trading charts methodically, follow the same order every time: the higher timeframe to define the trend, the structure of highs and lows, key levels, a confirmation signal on your execution timeframe and, finally, position size and stop. Indicators measure what price is already showing; they don’t replace it. What changes your results most is identifying whether the market is trending or ranging, because tools that work in one fail in the other. Below you’ll find the step-by-step process, a market regime table and a full EUR/USD example.

How to analyze trading charts step by step

Technical chart analysis starts from a simple idea: price reflects the balance between buyers and sellers, and that balance leaves repeatable footprints. To see how it fits with economic data, read the differences between technical and fundamental analysis. This is the process to repeat on every chart:

1. Higher timeframe: look at the daily (or the 4-hour if you day trade) and answer one question: uptrend, downtrend or range? Use a timeframe 4 to 6 times larger than your execution one: daily with 4-hour, 1-hour with 5- or 15-minute.
2. Structure: mark the last three relevant highs and lows. If both are rising, structure is bullish; if both are falling, bearish; if they overlap, it’s a range.
3. Levels: support and resistance that price has respected several times, the previous day’s and week’s highs and lows and, in futures, VWAP and the volume profile point of control. Broken support often acts as resistance afterward, and vice versa.
4. Confirmation: on your execution timeframe, wait for price to react at your level: a rejection candle, a break of minor structure or a close in the direction of the higher-timeframe trend. Candlestick formations are covered in candlestick patterns.
5. Management: the stop goes where the idea is invalidated; size is calculated from that distance, and the target sits at the next level. If the reward-to-risk ratio is below 1.5 to 1, skip the trade.

How to identify and read trends

An uptrend is a sequence of higher highs and higher lows; a downtrend, of lower highs and lower lows. A 50-period exponential moving average (EMA) helps you see it at a glance, but the definition lies in the structure, not the average.

Signs a trend is weakening

• Shorter impulses: each new high clears the previous one by less.
• Deeper pullbacks: they go from 38% to 61.8% or more of the previous leg.
• Divergence: price makes a new high and RSI doesn’t.
• Break of structure: a close below the last higher low. This is the objective signal; the others are only warnings.

Key indicators for technical chart analysis

Pick one indicator per job. Combining RSI, stochastics and CCI doesn’t give you three confirmations: all three measure momentum with similar formulas and tend to agree.

Job	Indicator	Common setting	What to use it for
Trend	EMA	20 and 50 periods	Direction and pullback zones
Trend strength	ADX	14 periods	Separating trend (above 25) from range (below 20)
Momentum	RSI	14 periods, 70/30	Divergences and extremes in a range
Volatility	ATR	14 periods	Stop distance and position size
Volatility	Bollinger Bands	20 periods, 2 standard deviations	Squeezes before a breakout
Intraday average price	VWAP	Daily reset	Daily bias and reference level in futures
Volume	Volume profile (POC)	Session or week	Prices where the most volume traded

If you use TradingView, the settings for each are in the most popular TradingView indicators. In futures, volume profile gives you levels you can’t see on candles; a concrete use case is in the hidden point of control in futures.

Trending vs ranging markets: how to adapt your strategy

Most strategies lose money because they’re applied in the wrong regime: buying pullbacks works in a trend and turns into buying an endless slide in a bear market; selling at resistance works in a range and means stepping in front of the train in a strong trend. Before you look for entries, classify the market.

Regime	How to spot it	Tools that work	What to avoid
Strong trend	Clear structure, ADX above 25, price on one side of the 50 EMA	Pullbacks to the 20 EMA or the 38–61.8% zone, breakouts from consolidations in the trend’s direction	Fading the trend because RSI looks “overbought”
Range	Overlapping highs and lows, ADX below 20, flat EMA	Range support and resistance, RSI at extremes, VWAP and POC as magnets	Buying breakouts without confirmation
Squeeze	Narrow Bollinger Bands, ATR at multi-week lows	Wait for the breakout and enter on the retest	Guessing the direction
Extreme volatility	ATR double its normal level, news candles	Cut size in half or stay out	Tight stops that noise takes out
Transition	First break of structure after a long trend	Wait for a new high or low to confirm	Assuming the previous trend continues

In practice, keep two written plans, one for trends and one for ranges, and decide which to use before the session based on the higher timeframe. For the squeeze regime, the breakout trading strategy details entry rules and filters against false breakouts.

Market cycle analysis

Cycles help you locate which phase price is in. There are three scales that matter to a trader:

The Wyckoff price cycle

Richard Wyckoff described four phases: accumulation (a range after a decline), markup, distribution (a range after a rally) and markdown. Ranges are the phases where the market changes hands; trends are where it moves. Knowing whether a range follows a rally or a decline points to the more likely breakout, without guaranteeing it.

The intraday session cycle

In forex and indices, the Asian session tends to form a narrow range; London (3:00 a.m. New York time, 8:00 GMT) breaks or sweeps that range, and New York (9:30 a.m. ET for stocks) sets the day’s direction. The link between sessions and liquidity is covered in trading sessions and liquidity for EUR/USD, DAX and Nasdaq.

The business cycle

Bonds, stocks, commodities and the dollar change direction at different points in the business cycle. This is where intermarket analysis comes in.

Intermarket analysis: what to watch beyond your chart

Intermarket analysis, popularized by John Murphy, studies how the major markets influence each other. According to StockCharts’ summary of his work, these are the benchmark relationships:

• Dollar and commodities: inverse. A strong dollar weighs on oil and gold, which are priced in dollars.
• Bonds and commodities: inverse. Falling commodities ease inflation pressure and favor bonds.
• Bonds and stocks: it depends on the environment. With inflation they tend to move together; with deflation, in opposite directions.

In practice: before selling EUR/USD, check whether the dollar index and 2-year US Treasury yields are rising; before buying NQ, whether ES is going along. Over the past year, the daily correlation between ES and NQ was 0.93 and between EUR/USD and GBP/USD, 0.85: when the “sibling” market doesn’t confirm, the signal loses quality. How those correlations affect risk is explained in the risk management in trading guide.

Worked example: a full EUR/USD chart analysis

A hypothetical example with rounded levels, to show the process. It is not a recommendation.

1. Daily: lower highs at 1.1690, 1.1520 and 1.1380, and lower lows at 1.1450, 1.1290 and 1.1130. Price is below the daily 50 EMA, ADX(14) reads 28 and the daily ATR(14) is about 60 pips. Regime: downtrend. Short setups only.
2. 4-hour structure: the last bearish leg runs from 1.1380 to 1.1130 (250 pips) and price is pulling back.
3. Levels: the 50% retracement of the leg is at 1.1255 and the 61.8% at 1.1285, just below old support at 1.1290, now potential resistance. Zone of interest: 1.1255–1.1290.
4. Intermarket: GBP/USD also prints a lower high on the 4-hour and the dollar index is rising. Confirmed.
5. Confirmation on the 1-hour, during the London session: price tags 1.1287, forms a bearish engulfing candle and closes at 1.1262. Short entry at 1.1260.
6. Management: stop at 1.1300, above the zone (40 pips). First target at 1.1180, the intermediate 4-hour support (80 pips, 2 to 1); second at 1.1135, near the last low. With $110 of risk: 110 ÷ (40 × 10) = 0.27 lots. When price reaches 1.1220 (1 to 1), the stop moves to 1.1260.
7. Invalidation: a daily close above 1.1380 breaks the bearish structure and forces a switch to the range or uptrend plan.

If both targets are hit with half the position at each, the result would be about $277 before costs: 0.135 lots × 80 pips × $10, plus 0.135 lots × 125 pips × $10. If price hits the stop first, the loss is about $108.

Common chart analysis mistakes

• Starting on the 1- or 5-minute chart: you see trends that are noise on the daily.
• Drawing too many levels: with a line every 10 pips, any price “respects” a level.
• Switching indicators after every loss: a new indicator won’t fix a regime mistake.
• Ignoring the calendar: a US jobs or inflation release invalidates any short-term pattern.
• Not recording your analysis: without a screenshot of the chart before entry and a note on the regime, there’s no way to know what went wrong. That’s what a trading journal is for.

How to apply chart analysis with Emerge Profit

Emerge Profit offers simulated trading accounts where you can apply this process under defined risk rules. Futures are traded on Tradovate, NinjaTrader or TradingView; EmergeFX on cTrader or DXtrade:

• Futures Evaluation (from $60): MICRO, 25K, 50K and 100K accounts with EOD drawdown and 5 minimum days. Positions are closed before the end of each session, so it suits intraday analysis.
• Futures Instant Funding (from $130): no evaluation, 5K to 250K, with news trading allowed.
• EmergeFX Evaluation (from $68): 1-Step or 2-Step, with overnight positions allowed. Static drawdown and weekend holding allowed, which suits 4-hour and daily analysis like the example above.
• EmergeFX Instant Funding (from $120): static drawdown, 1:100 equivalent margin and swing trading allowed.

Keep the 50% consistency rule, the 10-second minimum trade duration and the hedging ban in mind when you design your entries.

How to analyze trading charts: FAQ

Sources

• StockCharts ChartSchool – Average Directional Index (ADX) (accessed November 2026).
• StockCharts ChartSchool – Intermarket Analysis (accessed November 2026).
• StockCharts ChartSchool – The Wyckoff Method: A Tutorial (accessed November 2026).
• CME Group Education – Support and Resistance (accessed November 2026).
• CME Group Education – Understanding Moving Averages (accessed November 2026).
• J. Welles Wilder Jr., New Concepts in Technical Trading Systems, Trend Research, 1978.
• Yahoo Finance – daily closes for EURUSD=X, GBPUSD=X, ES=F and NQ=F, November 7, 2025 to November 6, 2026 (accessed November 7, 2026; our own correlation calculation).

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