The 80/20 of Reading a Chart: Support, Resistance, Order Blocks, Liquidity and Breakouts — Explained Simply

If you only learn how to draw support and resistance properly, you already have most of it. You do not need forty indicators. You need to know where price has reacted before, where the stops are, and what a breakout and a pullback actually are. That is 80% of chart reading, and this page covers it in plain words with nothing more than a bare candlestick chart.

Why price goes up and down

Price moves when aggressive orders outnumber the orders waiting at the current level. More market buys than resting sells: price ticks up until it finds enough sellers. More market sells than resting buys: it ticks down. Every candle is a record of that fight. A long body means one side won clearly; a long wick means one side pushed and was rejected. That is all the "psychology" you need to start.

Support and resistance: what they are

Support is a price area where buying has repeatedly stopped a decline. Resistance is an area where selling has repeatedly stopped a rise. They are areas, not lines — a zone a few points wide on NQ, wider on higher timeframes.

They work because of memory. (Investopedia's support and resistance basics covers the textbook definitions if you want them.) Traders who bought at support remember it and buy again; traders who sold there before are gone; stops and pending orders cluster around obvious levels. When support breaks, it often becomes resistance (the buyers who are now trapped sell into any bounce), and vice versa. That "flip" is one of the most reliable things on a chart.

How to draw them (the only method you need)

1. Start on the daily, then the 4-hour, then the 1-hour. Higher timeframes matter more; a daily level beats a 5-minute level every time.
2. Look for turns, not touches. A level is a place where price reversed — a swing high or swing low with clear space on both sides. Two or more reversals at roughly the same price make a zone.
3. Draw a zone, not a line. Wrap the wicks and the bodies of the reversal candles in a rectangle. If the zone is thin, use the candle bodies; if wicks are messy, use the bodies plus a little.
4. Prefer recent and obvious. The previous day's high and low, the overnight high and low, the weekly open, last week's high and low. If it takes you a minute to find a level, other traders will not see it either, and it will not matter.
5. Delete what price ignores. If price cuts through a zone twice without reacting, it is not a level any more.

Aim for three to five zones on the chart you trade. When we review charts, the most common problem is not missing levels — it is thirty of them. More than that and you have drawn noise.

Order blocks: where the big position was built

An order block is the last candle against the trend before a strong, fast move that broke structure. In an uptrend: the last red candle before the big green push that made a new high. In a downtrend: the last green candle before the drop.

Why it matters: that candle is where a large buyer (or seller) was filling their position right before they pushed the market. When price comes back to that area, they often defend it — buying again in an up-move — so it acts like a very specific support or resistance zone.

How to find one: locate a displacement — a big-bodied candle or two that broke a prior high or low — and mark the opposite-coloured candle just before it. The zone is that candle's body (some traders use the wick too). It is only valid if the move after it actually broke structure; a big candle that went nowhere does not create one.

Liquidity pools: where the stops are

A liquidity pool is a place where a lot of orders will be triggered at once — mainly stop losses. They sit:

• just above obvious swing highs (stops of short sellers, breakout buyers)
• just below obvious swing lows (stops of longs)
• beyond equal highs / equal lows (double tops and bottoms — everyone's stop is there)
• around round numbers and the previous day's high/low

Big participants need those pools to fill large orders, which is why price so often pushes just past an obvious level, triggers the stops, and reverses. If a level looks obvious, assume there is a pool beyond it and expect it to be tested, not respected exactly.

Breakouts: what they are and why they happen

A breakout is price moving decisively through a support or resistance zone and holding beyond it. It happens when the orders waiting at the level are exhausted — the sellers at resistance are all filled and buyers are still coming — plus a burst of new orders from breakout traders and stopped-out shorts.

Two kinds, and telling them apart is most of the skill:

• Real breakout. Large-bodied candle through the level, follow-through on the next candles, and the level holds on the retest. Usually happens with the session behind it (New York open, afternoon) and with volume.
• False breakout (sweep). A wick or one candle through the level, no follow-through, and a close back inside. The breakout traders were the liquidity. Usually happens at session opens or on thin volume.

Rule: judge the breakout on the close of the 15-minute or 1-hour candle, never on the wick.

Pullbacks: where to look for them

After a real breakout or a strong impulse, price usually comes back — a pullback — before continuing. That is where the better entries are, because you are buying from the trapped sellers instead of chasing the buyers. Look for pullbacks at:

1. The broken level. Old resistance becomes new support; the retest of the breakout zone is the classic entry.
2. The order block behind the impulse.
3. The 38.2–61.8% retracement of the impulse leg (draw a Fibonacci tool from the start to the end of the move).
4. A gap left by the impulse — a candle so fast it left an imbalance; price often returns to fill part of it.

The pullback you want is orderly — smaller candles, overlapping — and it stops at one of those places. A pullback that comes back fast with big candles is not a pullback; it is the other side taking over.

Putting it together in one minute

Open the daily: mark three to five zones. Drop to the 4-hour and 1-hour: mark the order blocks behind the last impulsive moves and the pools beyond the obvious highs and lows. Then wait. Price at a zone → watch the close. Price past a zone → real or sweep? Price pulling back after a real move → which of the four places is it heading for?

That is the whole map. MyTradingBuddy draws it on the chart you already have open in TradingView — the zones, the structure, the levels — and explains the setup it sees so you spend your attention on the decision, not the drawing.

Start the 3-day trial for $14.07 and mark the zones on the chart you already have open: https://mytradingbuddy.ai/pricing

Related reading

• Best indicators for MyTradingBuddy
• How institutions move price: what manipulation really is
• Order block filled or just tapped?
• ICT trader basics
• Reading NQ by the clock

Nothing here is financial advice. Chart reading is a process, not a prediction. Trading involves risk.