How to Read a Candlestick Chart

The candlestick chart is the trader's native language. Once you can read candles, a chart stops being a wiggly line and becomes a running account of the fight between buyers and sellers. It is the first real skill to build.

Anatomy of a candle

Each candle covers one slice of time, a minute, an hour, a day, whatever timeframe you choose, and shows four prices:

• Open: the price at the start of the period.
• Close: the price at the end.
• High and low: the extremes reached during it.

The thick body runs between the open and close. The thin lines above and below, the wicks, mark the high and low. A candle is usually coloured green when it closed up and red when it closed down.

What candles tell you

The shape carries the meaning. A long body with small wicks shows one side was firmly in control. A small body with long wicks shows a struggle with no clear winner. A long lower wick means price was pushed down then bought back up, hinting at buyers; a long upper wick means it was pushed up then sold off, hinting at sellers. Read the body for who won, and the wicks for who tried and failed.

Reading sequences, not single candles

One candle is a data point; a sequence is a story. A run of strong green bodies shows momentum; shrinking bodies show it fading. Where a candle forms matters too: a long lower wick at a support level is far more meaningful than the same wick in the middle of nowhere. Always read candles in the context of the levels around them.

Key takeaways

• Each candle shows the open, high, low and close for its period.
• The body shows who won; the wicks show who tried and got rejected.
• Read candles in sequence and in the context of key levels, not in isolation.