Reading a candlestick chart

Each candle has two parts: the body and the wicks. The body shows the opening and closing prices of the period. The wicks, sometimes called shadows or tails, show the highest and lowest prices reached during the period. A bullish candle, where the price closed higher than it opened, is conventionally shown in green or white. A bearish candle, where the price closed lower than it opened, is shown in red or black. The colour of the body therefore tells you immediately whether the period closed up or down.

The body of a candle shows where buyers and sellers settled. A long body suggests strong directional pressure. A short body suggests indecision, with neither side able to push the price far from where it opened. The wicks show the range that was rejected. A long upper wick means the price went up during the period but was pushed back down before the close. A long lower wick means the opposite.

Reading wicks alongside bodies tells you not just how a period closed, but how the price behaved on the way there.

Reading wicks alongside bodies tells you not just how a period closed, but how the price behaved on the way there.

Each candle represents one period of time, defined by the chart's timeframe. On a 1-hour chart, every candle is one hour. On a daily chart, every candle is one trading day. The same instrument plotted on different timeframes will tell different stories. A trend that looks decisive on a 4-hour chart may be just a small move on the weekly. Most platforms default to a 1-hour or daily view. Choose the timeframe that matches your trading style.

Specific candle shapes have well-known names because they appear frequently and often precede certain types of price action.

A doji has a tiny body with wicks above and below, suggesting indecision. A hammer has a small body at the top of the candle and a long lower wick, often signalling rejection of lower prices. A shooting star is the inverse, with a small body at the bottom and a long upper wick. Engulfing patterns are two-candle setups where the second candle's body fully contains the first, suggesting a possible reversal. A marubozu has no wicks at all, signalling strong one-sided pressure.

Candlestick patterns are descriptive, not predictive. A doji shows indecision in the period that just closed. It does not guarantee what happens next. Patterns work best when read in the context of trend, support and resistance, and the broader market environment. Treat candlestick analysis as one input among several, not as a stand-alone signal.