A candlestick chart compresses a period of trading into a single shape. Each candle covers one unit of time, such as a minute, an hour or a day, and shows four prices from that period: where it opened, its high, its low and where it closed. Traders call these OHLC.
Anatomy of a candle
The thick part is the body, the range between the open and the close. The thin lines above and below are the wicks (also called shadows), reaching to the high and the low. If price closed higher than it opened, the candle is bullish, usually drawn green or white. If it closed lower, it is bearish, usually red or black.
How a candle is formed
A candle doesn't show how price travelled during the period, only where it started, where it ended and how far it reached in each direction. An hour that drifted up steadily and an hour that crashed and then recovered can produce candles that look alike.
What the shape tells you
The proportions of body and wicks describe the fight between buyers and sellers during the period.
- A large body with small wicks means one side was in control from open to close.
- A tiny body (a doji) means price ended near where it started: neither side won.
- A long lower wick means sellers pushed price down but buyers pushed it back. Those lows were rejected.
- A long upper wick means buyers pushed price up but sellers drove it back. Those highs were rejected.
| Feature | What it shows | Read it as |
|---|---|---|
| Body size | Distance between open and close | Conviction: bigger body, more decisive move |
| Upper wick | How far price rose before being pushed back | Selling pressure above |
| Lower wick | How far price fell before being pushed back | Buying pressure below |
| Close | Where price settled at the end | The most important of the four prices |
The timeframe changes everything
One daily candle contains twenty-four 1-hour candles, and each of those contains sixty 1-minute candles. A strong bullish daily candle can include hours of selling. Always know which timeframe you're reading, and remember that a higher-timeframe candle carries more weight than a lower-timeframe one.
Key takeaways
- Each candle shows the open, high, low and close for one period of time.
- The body spans open to close; the wicks reach to the high and low.
- Large bodies show control; long wicks show rejection; tiny bodies show indecision.
- Candles summarise the period but hide the path; judge them only after they close.