How to read a candlestick chart

Lesson 1/6~5 min
Preparing the chart…

Each candle tells you, in one shape, where price opened in the chosen time frame, how high and how low it went, and where it closed.

Every vertical shape in the chart above is a candle. A candle is a short summary of a fixed period of time (for example 4 hours): where price was at the start of that period, the highest and lowest prices it reached along the way, and where it stood when the period ended.

The thick part of the candle is called the body. The body spans the distance between the open and the close. If the close is above the open, the candle is green: buyers won that period. If the close is below the open, the candle is red: sellers won. The thin lines above and below the body are called wicks (or shadows). A wick shows where price went during the period but could not stay.

A single candle gives you one sentence of the story; a few candles side by side make a paragraph. A long green body says ‘buyers were in control from start to finish’. A small body with a long lower wick says ‘sellers pushed price down, but buyers took it back’. If you see a coloured frame around some candles in the chart, the system has detected a known candle pattern there; the frame colour tells you its direction: green bullish, red bearish, orange indecisive.

The right-most candle has not closed yet, which is why it gently pulses. Its colour and size can change until the period ends, so do not make decisions based on it.

How to read it

  1. Look at the colour first: on a green candle the close is above the open, on a red candle it is below. The colour tells you who won that period.
  2. Then look at the length of the body: a long body means a decisive move, a short body means indecision. Several long bodies of the same colour in a row show one side taking control.
  3. Look at the wicks: a long lower wick means buyers stepped in below; a long upper wick means sellers were waiting above. A wick is where price ‘tried but could not stay’.
  4. If there is a framed candle in the chart, hover or tap it: in the evidence card you can read which pattern the system saw on those candles and what it may mean.

Trap

The most common mistake is drawing big conclusions from a single candle. A hammer or a long wick alone does not mean ‘the bottom is in’; it only says buyers reacted during that period. Always read a candle together with its surroundings: the direction of the trend, nearby support or resistance, and whether the next candle confirms it. And never decide on the last unfinished candle; its colour can flip completely before the period ends.

Tip

When you open the same stock on different time frames, the candles tell a different story. The next lesson covers exactly this: a day that looks red on a 15-minute chart can be a single green candle on the daily chart.

Glossary

Body
The thick part of a candle between its open and close prices.
Wick (shadow)
The thin line above or below the body that reaches the period's highest and lowest price.
Doji
A candle whose open and close are almost equal, leaving a very thin body; it signals indecision.
Hammer
A small-bodied candle with a long lower wick; it shows buyers appeared below, but on its own it is not proof of a reversal.

Mini quiz

  1. What does a green candle tell you?
  2. What is the best way to read a long lower wick?
  3. What should you do if the right-most candle on the chart is still forming?

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Study a stock's candles in an analysis →

For information only, not investment advice.