Reading charts isn’t just about spotting familiar shapes – it’s about understanding the story price is telling. Many traders fall into visual traps, focusing on isolated patterns while ignoring the broader structure that gives them real meaning.
In this post, we’ll break down five of the most common chart analysis mistakes and how to avoid them, by learning to read price action in a structured and disciplined way, just as Al Brooks teaches us.
The Foundation of Chart Reading: Going Beyond the Obvious
1. Trusting Patterns Without Market Context: “Look to the Left!”
It’s tempting to see a series of price action setups and feel like it’s a signal to act. But price action doesn’t work in isolation.
A good looking reversal bar in the middle of a trading range means something entirely different than one appearing at the top of a strong, climactic rally. Al Brooks always reminds us: “Look to the left!” – the chart’s history is crucial.
The solution: Always ask yourself “Where is this pattern forming?“ The structure of the market (trend, channel, trading range, relevant highs/lows) matters far more than the simple shape of the candle. A pattern only gains relevance when it occurs in a logical location for a reversal or continuation.
2. Misinterpreting Candle Strength and Structure: Not All Bars Are Created Equal
No, not all bars are created equal. A reversal bar in a tight range often doesn’t mean much — because without the right context, even the best-looking bars are just noise.
Many traders overvalue weak signals simply because they fit a recognizable shape. What truly matters is the commitment behind the move.
The solution: Pay attention to bar strength:
- Range: Larger bars show more conviction.
- Close position: A close near the high (for bullish) or low (for bearish) indicates control by that side.
- Relationship to prior bars: How does it fit into the sequence? Is there follow-through?
3. Letting Indicators Distract from Price Action
A cluttered chart filled with RSI, Bollinger Bands, MACD, and multiple moving averages might look sophisticated. But, in reality, it often distracts from what price is truly doing.
You’re no longer reading price directly; you’re interpreting a filtered version of it. This kind of distraction is one of the most overlooked issues in modern technical analysis.
The solution: Strip down your chart! A single 20 EMA (for trend context) is perfectly acceptable. The rest? Let price speak for itself. Recognizing these mistakes can drastically simplify your approach and keep your focus where it truly matters: on the clean structure of price.
4. Analyzing Bars in Isolation Without Context (The Story is a Sequence)
Looking at the current bar without considering what happened before is like trying to understand a story by reading only one sentence in isolation.
A reversal bar might look good — until you realize it’s the fourth consecutive attempt to break a level, and all previous ones failed. Or perhaps it’s a bull bar in a bear trend, sitting right below strong resistance.
The solution: Read price as a sequence.
- Where is the market coming from?
- Which attempts have failed before?
- Is strength building, or is exhaustion setting in?
Trading is about reading the flow of the market, the “movie,” not just isolated “snapshots.” Bar-by-bar analysis only works when it includes the “memory” of what came before. “snapshots.” Bar-by-bar analysis only works when it includes the “memory” of what came before.
5. Mistaking Normal Pullbacks for True Reversals (Patience is Gold!)
Not every pause in price means a reversal is coming. A pullback is a perfectly normal movement within a trend, a necessary breather. Price often resumes in the original direction after a brief pause.
Many traders confuse ordinary pullbacks with major reversals – and end up trading against strong trends prematurely.
The solution: Don’t trade against the trend unless you have a complete and clear reversal structure. This includes multiple signs, such as:
- A trendline break.
- A lower high after a new low (or vice-versa for bear trends).
- A failed retest of an extreme.
Don’t assume every pullback is the start of something bigger – wait for clear evidence that the big players are genuinely shifting sides.
Final Thoughts
Clean chart reading is an art built on observation, structure, and patience.
Avoiding these five common mistakes will sharpen your ability to read what’s truly happening – not just what an isolated pattern suggests.
Price action becomes far more powerful when it’s about the story of movement, not just the shape of one bar. Mastering chart reading isn’t about memorizing patterns; it’s about learning to interpret structure, strength, and sequences over time.
Avoiding these errors can revolutionize the way you see the market. You’ll trade less impulsively, spot higher-probability setups, and develop a much deeper connection to what price is really doing – not just what it looks like it’s doing.
Price action is the language of the market. Learning to read it fluently is your real edge.
Continue Your Price Action Journey:
- Explore more: What Is Price Action? A Beginner’s Guide to Clean Charts
- And if you’re building your foundation around structure-based setups, check out: Price Action Trading Strategies That Actually Work
