Reading Candlestick Charts
Master the visual language of price action and market sentiment
What You'll Learn
Candlestick charts originated in 18th century Japan for rice trading and are now the standard for analyzing financial markets. Each "candlestick" shows four key prices: open, high, low, and close (OHLC) for a specific time period.
Anatomy of a Candlestick
The Body
The thick rectangular part shows the range between the open and close price. A green/white body means the price closed higher than it opened (bullish). A red/black body means it closed lower (bearish).
The Wicks (Shadows)
The thin lines above and below the body show the highest and lowest prices reached during that time period. Long wicks indicate high volatility.
Time Frame
Each candlestick represents a specific time period - 1 minute, 1 hour, 1 day, etc. Choose based on your trading style: shorter for day trading, longer for investing.
Quick Reference
Bullish Candle
Price went UP. Close > Open
Bearish Candle
Price went DOWN. Close < Open
Common Candlestick Patterns
Doji
Open and close are nearly equal, forming a cross shape. Indicates indecision in the market.
Potential reversalHammer
Small body at the top with a long lower wick. Shows buyers pushed the price back up after a drop.
Bullish reversalEngulfing
A candle that completely covers the previous candle. Shows a shift in momentum.
Trend reversalMorning/Evening Star
Three-candle pattern with a small middle candle. Signals the end of a trend.
Strong reversalPro Tips
- Never rely on a single candle - look for patterns and confirmation
- Combine candlestick analysis with other indicators like volume
- Practice on historical charts before trading with real money