Candlesticks, explained
A candlestick chart packs four prices into one shape: where a period opened, where it closed, and the highest and lowest prices traded in between. Once you can read a single candle, the chart stops being noise and starts telling you who was in control.
Anatomy of one candle
- The body spans the open and the close. Most charts color it green or hollow when the close is above the open, and red or filled when the close is below.
- The wicks, also called shadows, run from the body to the high and the low. A long upper wick means price went up during the period and was pushed back down.
- The timeframe decides what one candle covers. On a daily chart each candle is one trading day. On a 15-minute chart it is fifteen minutes.
Read a candle as a short story. A long green body with small wicks says buyers pushed price up and held it there. A small body with long wicks on both sides says the period ended near where it started after a fight in both directions.
Timeframes change the picture
The same market can look bullish on a 5-minute chart and bearish on a weekly one. Start with a higher timeframe to see the main direction, then move lower to see detail. A pattern on a daily or weekly chart carries more weight than the same pattern on a 1-minute chart, because more trading went into it.
Patterns worth knowing
| Pattern | What it looks like | What it suggests |
|---|---|---|
| Doji | Open and close almost equal, wicks on both sides | Indecision. Matters most after a strong run. |
| Hammer | Small body at the top, long lower wick, after a fall | Sellers pushed down, buyers pushed back. |
| Shooting star | Small body at the bottom, long upper wick, after a rise | Buyers pushed up, sellers pushed back. |
| Bullish engulfing | A green body that fully covers the previous red body | Buyers took over within one period. |
| Bearish engulfing | A red body that fully covers the previous green body | Sellers took over within one period. |
None of these patterns predict the next move on their own. They describe a shift in pressure. They become more useful when they appear at a level where price has turned before, and when volume is higher than usual.
Common mistakes
- Reading one candle in isolation. A hammer in the middle of a range means little. The same hammer at a long-standing support level means more.
- Acting before the candle closes. A candle can change shape completely until its period ends.
- Ignoring the bigger trend. A bullish pattern inside a strong downtrend often fails.
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