Study guide
4.1 An Overview of Charting
CMT Level I Chartered Market Technician
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1 Introduction and Exam Overview
1.1 Current CMT Level I Exam Facts 1.2 Charter Path and Study Plan
2 Theory and History Foundations
2.1 A Brief History of Technical Analysis 2.2 The Dow Theory 2.3 Markets, Instruments, Data, and the Technician
3 Market Hypotheses and Fibonacci
3.1 The Efficient Markets Hypothesis 3.2 The Fibonacci Sequence and the Golden Ratio
4 Chart Types and Construction
4.1 An Overview of Charting 4.2 The X Axis 4.3 The Y Axis 4.4 Charting Volume and Open Interest
5 Trend Analysis
5.1 What Is a Trend 5.2 A Trend's Four Phases 5.3 Trend Identification and Following
6 Volume, Open Interest, and Internals
6.1 Introduction to Volume Analysis 6.2 Volume, Open Interest, and Price 6.3 Market Internals
7 Chart Pattern Analysis
7.1 Classical Chart Patterns 7.2 Introduction to Candlesticks 7.3 Introduction to Candlestick Patterns 7.4 Basics of Point-and-Figure Charting
8 Internal and External Technical Indicators
8.1 Moving Averages 8.2 Technical Indicator Construction 8.3 Introduction to Bollinger Bands
9 Statistics for Technicians
9.1 Introduction to Statistics, Part 1 9.2 Introduction to Statistics, Part 2 9.3 Introduction to Probability
10 Behavioral Finance and Sentiment
10.1 Behavioral Finance 10.2 Market Sentiment and Technical Analysis 10.3 Sentiment Measured from Market Data 10.4 Sentiment Measured from External Data
11 Cycle Analysis
11.1 Foundations of Cycle Theory 11.2 Common Cycles
12 Equities, Indexes, and Fixed Income
12.1 Equities 12.2 Indexes 12.3 Fixed Income and Bonds
13 Futures, ETPs, and Currencies
13.1 Futures 13.2 Exchange-Traded Products 13.3 Foreign Exchange
14 Digital Assets and Options
14.1 Digital Assets 14.2 Options
15 Relative Strength
15.1 Introduction to Relative Strength 15.2 Relative Strength and Its Uses
16 Volatility Analysis
16.1 The Meaning of Volatility to a Technician 16.2 Measuring Historical Volatility 16.3 Options-Derived Volatility
17 Systematic Methods and Ethics
17.1 Introduction to Quantitative Methods 17.2 Code of Ethics 17.3 Standards of Professional Conduct
4.1 An Overview of Charting
Key Takeaways Explain This Topic AI
A technician uses a chart to compress a tape of prints into a visual summary of price action so direction, range, and location can be read faster than from a table.
The four basic price points on an interval chart are open, high, low, and close (OHLC); volume, VWAP, and bid/ask are not those four points.
A line chart usually connects one series per interval (typically the close); a bar encodes OHLC with a high-low shaft, a left open tick, and a right close tick.
A candlestick uses the same OHLC: the real body runs from open to close, and the wicks run from the body to the high and the low.
Range on a bar or candle is high minus low of that interval, not close minus open and not close minus the prior close.
Last updated: September 2026
Classical Techniques is 33% of CMT Level I weighting in the 2026 Program Guide. The first unit in that domain is not pattern-reading. It is chart types and construction : how a technician turns a stream of prints into a picture, which prices that picture is allowed to show, and how range is measured on a bar or candle.
This ExamFinch chapter is independent study material for CMT Level I topics. The CMT Association owns the Chartered Market Technician (CMT) designation and administers the CMT Program. These pages are not an Association publication and do not claim official approval, review, or partnership.
How a technician uses charts to summarize price
A live market is a time-stamped tape : each trade has a price and a time. Nobody studies for Level I by reading millions of ticks. A chart is a summary of price action . It compresses the auction into glyphs — a line segment, a bar, or a candle — so the eye can see direction , range , pauses , and turns that a column of numbers hides.
The technician is not decorating a screen. The job is to reduce the tape to the few prices that describe each interval, then read those prices as a sequence. Chart construction is therefore a data decision before it is an artistic one: which prices go on the plot, which interval each glyph represents, and which visual code you will use.
When you change construction, you change what you are allowed to conclude. A close-only line can show a trend in settlement prices and still hide a session that traded two percent above and below that close. A weekly candle can look calm while the daily candles inside it were violent. Construction literacy is how you avoid treating the picture as if it were the market itself.
Advantages of reviewing price in chart format
Tables are exact. Charts are fast . The exam wants the advantages of the chart format , not a claim that numbers are useless.
- Advantage What the chart does that a raw tape or table does not
- Compression Thousands of prints collapse into one glyph per interval
- Pattern recognition Slope, congestion, and swings become visible as shapes
- Memory A year of daily bars fits on one screen; a year of ticks does not
- Comparison Two instruments, or two intervals, can be stacked or overlaid
- Communication A marked-up chart is a shared language for trend and risk
- Context Today's bar sits next to last month's bars, so "high" has a history
Charts also impose honesty about missing information . If you chose a line of closes, the chart admits that opens, highs, and lows are not on the page. If you chose daily bars, the chart admits that you are not looking at five-minute noise. Those admissions are advantages: they keep the analysis matched to the data you actually plotted.
In practice
You open a notebook of closing prices for a stock that rallied from 40 to 80 over two years. Scanning the column, you can compute returns, but you will not "see" the three-month rectangle under 72 or the sharp range expansion on the breakout day. Plot the same closes as a line , and the rectangle and the slope change appear in seconds. Add high-low bars , and you see that the breakout day had a range twice the recent average — information that never existed in a close-only column.
The four basic price points
Almost every conventional interval chart is built from four prices, remembered as OHLC :
Open — the first traded price of the interval, or the official opening print the venue publishes for that session.
High — the highest traded price during the interval.
Low — the lowest traded price during the interval.
Close — the last traded price of the interval, or the official settlement on some futures, which can differ from the last tick.
Those four numbers are the minimum description of an auction over a window of time. They do not tell you the path between open and close (whether price spiked first then faded), and they do not tell you volume . They do tell you where the interval started, where it was allowed to travel, and where it ended.
High and low are extremes . Open and close are location prices: they mark the start and finish of the crowd's work in that window. Later candlestick work treats the relationship between open and close as a sentiment clue. At this construction stage, treat them as data fields .
Worked session: a stock opens at 48.20 , trades as high as 51.10 , as low as 47.75 , and closes at 50.40 . The four points are O 48.20 , H 51.10 , L 47.75 , C 50.40 . Every line, bar, or candle for that session is a different drawing of those same four numbers.
Do not confuse OHLC with bid , ask , mid , or VWAP . Those are useful series. They are not the four basic charting points in this unit.
Line charts
A line chart plots one price per interval and connects the dots in time order. The default series is the close (or last, or settlement). Some analysts plot the typical price (H + L + C) / 3 or the median price (H + L) / 2 , but if a stem says "line chart" without a qualifier, assume closes connected in chronological order .
Construction:
Choose the interval (daily, weekly, and so on).
Take one price per interval — usually the close.
Place each price at the correct time coordinate.
Draw line segments between consecutive points.
Information present: direction of the chosen series, relative highs and lows of that series, and a clean slope.
Information absent: intra-interval range , the open , and often any sense of whether the close was at the extreme of the session. A line can hide a wide, two-sided day that closed unchanged.
Line charts earn their keep on long histories, overlays of several instruments, and any plot where extra ticks would clutter the message. They are a filter , not a full OHLC record.
Bar charts
A bar chart (OHLC bar, sometimes called a Western bar ) encodes all four prices in one vertical mark.
Construction of one bar:
Draw a vertical line from the interval low to the interval high . That shaft is the range .
Draw a short tick to the left at the open .
Draw a short tick to the right at the close .
If close is above open, the right tick sits higher than the left tick. If close is below open, the right tick sits lower. Some historical newspaper charts omitted the open and showed only high, low, and close ( HLC ). CMT Level I construction of a full bar uses four points; know that HLC exists so you are not confused if software hides the left tick.
Information present: the full range, where the auction started, where it ended, and whether the close finished near the high, the low, or mid-range.
Information absent: the path . A bar that opened at 50, ran to 55, dumped to 48, and closed at 54 looks identical to a bar that opened at 50, dipped to 48, rallied to 55, and closed at 54. Construction does not recover intra-bar order beyond the four points.
Candlestick charts
A candlestick uses the same four prices with a different glyph. Japanese rice-market practice is the historical root; modern equity and futures platforms use the same OHLC fields.
Construction of one candle:
The real body is a rectangle from open to close .
The upper wick (upper shadow ) is a line from the top of the body to the high .
The lower wick (lower shadow ) is a line from the bottom of the body to the low .
Coloring is a construction convention , not yet a pattern catalog. Common defaults:
Close above open: up candle — often hollow, white, or green body.
Close below open: down candle — often filled, black, or red body.
Open equals close (or nearly): a thin body that later units may call a doji . Save named reversal combinations for the candlestick-pattern section; here, a missing body means open and close occupied the same (or nearly the same) price.
If the high equals the greater of open and close, there is no upper wick . If the low equals the lesser of open and close, there is no lower wick . An all-body candle is still a construction outcome of OHLC, not a trade signal in this section.
Information present: everything the bar has, plus a filled-versus-empty (or color) cue that makes open-versus-close immediate.
Information absent: still the intra-interval path. A candle is not a tick chart.
Range on a bar or candle
Range , applied to a bar or candlestick, is:
Range = High − Low
It is the vertical length of the shaft (bar) or of body plus wicks (candle). It is not :
Close minus open (that is body height).
Close minus prior close (that is the interval-to-interval change ).
True Range in Wilder's later sense, which also looks at gaps versus the prior close. True Range belongs with volatility tools. This unit's range is the simple high-low distance of this glyph.
Using the session above: High 51.10 − Low 47.75 = 3.35 points of range. The body is |50.40 − 48.20| = 2.20 . The lower wick is 48.20 − 47.75 = 0.45 . The upper wick is 51.10 − 50.40 = 0.70 . Body + wicks = 2.20 + 0.45 + 0.70 = 3.35 , which must match high − low. If those pieces do not add up, the chart is mis-drawn.
A narrow-range bar means high and low are close: little distance traveled in that interval. A wide-range bar means the auction covered a lot of price ground. Construction does not yet tell you whether wide range is "good" or "bad"; it tells you how to measure it.
- Chart type Built from What you see immediately What you must not assume is on the plot
- Line Usually closes Slope of the chosen series Open, high, low, intra-bar range
- Bar OHLC High-low shaft; left open; right close Tick path inside the interval
- Candle OHLC Body (open-close) and wicks (to high and low) Tick path; named reversal patterns (later unit)
- Construction from one tape
Take the same OHLC and draw all three:
Line: a point at 50.40 , connected to the previous session's close.
Bar: shaft 47.75–51.10 , left tick 48.20 , right tick 50.40 .
Candle: body 48.20–50.40 (up/green if that is your convention), lower wick to 47.75 , upper wick to 51.10 .
The market did not change. The summary changed. Level I stems often test whether you can name which prices a picture must contain.
Exam traps in this unit
Naming volume or VWAP as a "basic price point." Volume is activity; VWAP is an average. The four points are open, high, low, close .
Calling range the day's gain. A stock can close unchanged and still have a large high-low range.
Putting the open on the right of a bar. Right is close ; left is open .
Treating a line chart as incomplete data rather than a close-only (or single-series) construction choice.
Later chapters use these glyphs to read trend , patterns , and candlestick combinations . This section stops at how the picture is built and what each picture contains . Independent CMT Level I practice by ExamFinch is at /practice/cmt .