Reading candlestick charts
What each candle tells you about open, high, low and close, and how to read a chart without over-reading it.
What a single candle shows
A candlestick summarises price over one period, such as one hour or one day. It shows four values: the open (the first price), the high (the highest price), the low (the lowest price) and the close (the last price). The thick part is the body, the range between open and close. The thin lines above and below it are the wicks, which show how far price travelled before returning.
A bullish candle closes above where it opened and is usually drawn green or white. A bearish candle closes below its open and is usually drawn red or black. Neither colour predicts what happens next on its own.
Timeframes matter
The same price action looks different on a five-minute chart and a daily chart. Short timeframes show noise and are heavily affected by spreads and news. Longer timeframes show the broader trend and the levels that many traders watch. Choose one timeframe for your decisions and use a higher one only to understand the context.
Patterns are context, not signals
Named patterns such as the engulfing candle or the hammer are popular, but they are not reliable on their own. A pattern is more meaningful when it forms at an important level, such as support or resistance, and when it agrees with the wider trend. Treat a pattern as one piece of information, never as a guarantee that price will move a certain way.
Key takeaways
- Each candle shows open, high, low and close for one period.
- Long wicks show rejected prices, which can be useful context.
- Choose a timeframe and stick to it when making decisions.
- Candlestick patterns are most useful at important levels and in the direction of the trend.