Open almost any trading screen and the price is drawn as a row of small coloured bars with thin lines above and below them. These are candlesticks, and each one is a short story about what buyers and sellers did during a fixed slice of time.
Once you can read one candle, you can read the whole chart.
The four prices in every candle
Every candle covers one period: one minute, one hour, one day, whatever timeframe you choose. In that period it records four prices:
- Open: the price when the period started
- Close: the price when it ended
- High: the highest price reached
- Low: the lowest price reached
The body and the wicks
The thick part is the body. It runs from the open to the close.
- If the close is above the open, the price rose during the period. This is a bullish candle, usually drawn green.
- If the close is below the open, the price fell. This is a bearish candle, usually drawn red.
The thin lines are the wicks (or shadows). The top of the upper wick is the high; the bottom of the lower wick is the low. Wicks show where the price went but could not stay.
What a candle is telling you
A long body
A long green body means buyers were in control for most of the period. A long red body means sellers were. The longer the body compared with recent candles, the more decisive the move.
A small body
A small body means the open and close were close together. Neither side won the period. When this follows a strong move, it can be a sign the move is losing energy.
Long wicks
A long upper wick means the price was pushed up and then rejected. Sellers pushed it back down before the close. A long lower wick means the opposite: sellers pushed down, buyers pushed back. Long wicks at an important level are often more meaningful than the body itself.
Three patterns worth knowing
The doji
Open and close are almost the same, so the body is a thin line. It shows indecision. On its own it means little; after a long trend, at a support or resistance level, it is worth noticing.
The hammer and the shooting star
A hammer has a small body near the top and a long lower wick, at least about twice the body. After a fall, it shows sellers tried and failed. A shooting star is the mirror image: small body near the bottom, long upper wick, after a rise.
The engulfing candle
A candle whose body completely covers the previous candle's body, in the opposite colour. A green candle engulfing a red one after a decline is called bullish engulfing; the reverse is bearish engulfing. It shows control changing hands within two periods.
How not to use candlesticks
- Do not trade one candle in isolation. A pattern in the middle of nowhere means far less than the same pattern at a key level.
- Wait for the candle to close. Until the period ends, a hammer can still turn into something else.
- Check the timeframe. A pattern on a one-minute chart carries much less weight than the same pattern on a daily chart.
- Always know where you are wrong. A candle can suggest an entry; the stop-loss decides what it costs if the idea fails.
In short
Each candlestick shows the open, high, low and close of one period. The body shows who won; the wicks show where the price was rejected. Read candles together with the level they form at and the trend around them, and they become one of the clearest windows into what the market is doing.
Educational content, not investment advice. Trading carries risk, including the loss of capital.