How to Read a Candlestick Chart

What a Candle Shows You

Each candle summarizes one time period — a minute, day, week, whatever timeframe you're viewing. It tells you four things at once:

• Open — the price at the start of the period
• High — the peak price reached
• Low — the lowest price reached
• Close — the price at the end of the period

   │       ← upper wick (high)
  ╔═╗     
  ║ ║      ← body (open to close)
  ╚═╝
   │       ← lower wick (low)

A green/hollow candle = price closed higher than it opened (buyers won the period). A red/filled candle = price closed lower than it opened (sellers won the period).

Why Candlesticks Beat Line Charts

A line chart shows only the closing price. Candlesticks show the entire battle that happened during the period:

• Long body = decisive move; one side dominated
• Small body = indecision; neither side won
• Long wick = price was rejected from that level
• No wick = price closed at the extreme — strong momentum

You see emotion, not just outcomes.

Five Candles Worth Knowing

Doji

Body so small it's almost a line. Open ≈ close. Indecision. Often appears at trend reversals.

Hammer

Small body at the top, long lower wick. Sellers pushed price down, buyers slammed it back up. Bullish reversal signal at the bottom of a downtrend.

Shooting Star

Small body at the bottom, long upper wick. Buyers tried to rally, sellers crushed it. Bearish reversal at the top of an uptrend.

Engulfing Pattern

A candle whose body completely covers the previous candle's body. Bullish engulfing at a bottom or bearish engulfing at a top can mark a turn.

Marubozu

A candle with a big body and tiny or no wicks. Pure conviction — strongest possible move in that direction.

Context Beats Patterns

A hammer at random isn't a signal. A hammer at a known support level after a long downtrend is meaningful. Always read candles in context — never in isolation.

Timeframes Matter

The same chart looks bullish on the daily and bearish on the weekly. Pick the timeframe that matches your strategy:

• Day traders: 1-min, 5-min, 15-min
• Swing traders: 1-hour, 4-hour, daily
• Long-term investors: weekly, monthly

Candlesticks don't predict the future. They tell you what just happened — and what was being decided when no one was watching the headline.