Trading Defined
Technical AnalysisBeginner

Candlestick

A candlestick is a chart symbol that shows an asset’s open, high, low and close prices for one period of time.

Candlesticks are the most widely used way to draw price charts. Each candle packs four prices into one shape, and the shape itself tells a small story about who controlled that period — buyers or sellers. This entry builds on how to read a trading chart: it explains each part of a candle, the handful of patterns worth knowing, and why no pattern should ever be traded on its own.

Category
Technical Analysis
Reading time
7 min
Also called
Candle, Japanese candlestick, Candlestick pattern
Updated

A candlestick in plain words

Each candle covers one slice of time — one day on a daily chart, one hour on an hourly chart. Its thick body runs from the price at the start of that period to the price at the end. Its thin wicks stretch up to the highest price and down to the lowest.1

If the period ended higher than it began, the candle is bullish, usually drawn green or hollow. If it ended lower, it is bearish, usually red or filled. Colours are a setting in most charting software, so check the chart’s legend.1

Figure 1

Anatomy of a candlestick

Anatomy of a bullish and a bearish candlestickBullish candle: open $100, high $108, low $97, close $105. The body runs from the open up to the close; the upper wick reaches the high and the lower wick reaches the low. Bearish candle: open $105, high $106, low $96, close $99. The body runs from the open down to the close.Bullishclose above openBearishclose below openHigh $108Close $105Open $100Low $97upper wickbody $5lower wickHigh $106Open $105Close $99Low $96upper wickbody $6lower wick
The body spans open and close; the wicks reach the high and low. The same four prices produce a bullish candle when the close is above the open and a bearish one when it is below.

How to read a candlestick, step by step

  1. Check the timeframe

    A candle on a 5-minute chart and a candle on a weekly chart look identical but describe very different amounts of activity. See Timeframe.

  2. Read the colour

    Close above open: bullish. Close below open: bearish.

  3. Read the body

    A long body means price travelled far from open to close — one side was in control. A very short body means open and close were close together — neither side won the period.

  4. Read the wicks

    A long upper wick means price went much higher during the period but was pushed back down; a long lower wick means the opposite. Wicks show prices that were reached but rejected.

  5. Read it in context

    The same candle means different things at different places: a long lower wick at a support level after a fall is far more telling than one in the middle of a range. See Support and Resistance.

  6. Wait for the candle to close

    Until its period ends, a candle’s close is just the latest price, and its shape can change completely.

Worked examples

Example 1 — A hammer at support

Bullish hint

After several falling days, a daily candle opens at $50.00, drops to $47.00, and closes at $50.20, with a high of $50.40.

Example 1 — A hammer at support — calculation
Body (close − open)$0.20 — small
Lower wick (open − low)$3.00 — long
Upper wick (high − close)$0.20 — short
ShapeHammer

Sellers pushed the price down $3, but buyers took it all back by the close. After a decline, and especially near support, that rejection can hint that selling pressure is fading. Traders usually wait for the next candle to confirm.

Example 2 — A doji

Indecision

A candle opens at $82.10, ranges between $80.50 and $83.40, and closes at $82.15.

Example 2 — A doji — calculation
Body$0.05 — almost none
Full range$2.90
Body as a share of the range≈ 2%

Plenty of movement, no winner. A doji after a strong run can signal that the trend is pausing; in a quiet range it means very little.

Example 3 — A bullish engulfing pattern

Bullish hint

Day 1 opens at $104 and closes at $101 (bearish). Day 2 opens at $100.50 and closes at $105.50 (bullish).

Example 3 — A bullish engulfing pattern — calculation
Day 1 body$101 – $104
Day 2 body$100.50 – $105.50
Does day 2’s body cover day 1’s?Yes

The second day’s buyers erased all of the first day’s selling and more. It is a two-candle reversal hint — strongest after a clear decline and at a meaningful level.

Figure 2

Four patterns worth knowing

Four common candlestick patternsA doji, whose open and close are almost equal; a hammer, with a long lower wick after a decline; a shooting star, with a long upper wick after a rise; and a bullish engulfing pattern, where a rising candle’s body completely covers the previous falling candle’s body.Dojiopen ≈ close: indecisionpattern ↑Hammerafter a fall: buyers returnpattern ↑Shooting starafter a rise: sellers returnpattern ↑Bullish engulfingsecond body covers the firstpattern ↑
Each pattern is drawn after the move it usually follows. Patterns are hints about the balance between buyers and sellers, not signals that work on their own.

Common single- and two-candle patterns

AspectShapeUsually read asMost meaningful when
DojiOpen ≈ close, any wicksIndecisionAfter a strong trend
HammerSmall body at top, long lower wickSelling rejectedAfter a fall, at support
Shooting starSmall body at bottom, long upper wickBuying rejectedAfter a rise, at resistance
EngulfingBody fully covers the previous bodyControl switched sidesAfter a clear move, at a level
MarubozuLong body, little or no wickOne side dominatedAt the start of a breakout

Why traders use candlesticks

  • Fast reading

    Candles show the same four prices as an OHLC bar,2 but the coloured body makes direction visible at a glance.

  • Seeing rejection

    Long wicks show where the market tried to go and failed — information a line chart of closing prices hides.

  • Timing entries and exits

    Traders often wait for a confirming candle at a level before entering, and place stops beyond the wick of a rejection candle.

  • Judging volatility

    The size of recent candles shows how far price typically moves in a period, which helps set stops and position sizes.

Advantages and disadvantages

Advantages

  • Shows open, high, low and close in one compact shape.
  • Direction and strength of each period are visible instantly.
  • Wicks reveal rejected prices that line charts hide.
  • Works on any market and any timeframe.

Disadvantages

  • Patterns are subjective and can be found everywhere in hindsight.
  • Single candles on short timeframes are mostly noise.
  • A candle is unreliable until its period closes.
  • Colours and smoothing (such as Heikin-Ashi) can exaggerate or hide what actually traded.

Going deeper

Read as far as you need. Each level builds on the one before it.

Learn shapes, not names

Beginner

You do not need to memorise dozens of patterns. Ask three questions of any candle: who won the period (colour), by how much (body), and what was rejected (wicks).

Context, confirmation and volume

Intermediate

Patterns gain meaning from where they appear. Clusters of candles with long lower shadows — hammers — often show up around support levels where buying steps in.3 The same shape in the middle of a range says little.

Many traders treat a pattern as a setup and wait for confirmation, such as the next candle closing beyond the pattern’s high or low, ideally on rising Volume.

Data, sessions and derived candles

Advanced

A daily candle’s open and close depend on the session and time zone used by the data provider; for 24-hour markets each platform chooses its own cut-off, so candles can differ between platforms.4

Heikin-Ashi candles are calculated from averages of current and previous prices to smooth trends.5 They are useful for reading direction but do not show real traded prices, so never use them to judge fills or exact levels.

Common mistakes

  1. Trading a pattern without context

    A hammer in the middle of nowhere is just a candle. Location — trend, levels, timeframe — gives it meaning.

  2. Acting before the close

    An intraday hammer can turn into a bearish candle by the end of the day.

  3. Over-reading small timeframes

    On one-minute charts, most candle shapes are random. Patterns carry more weight on higher timeframes.

  4. Memorising instead of understanding

    Knowing fifty pattern names helps less than understanding why a long wick means rejection.

Check your understanding

Test yourself before moving on. Each answer comes with an explanation.

Q1A candle opens at $30, reaches $34, falls to $29.80 and closes at $30.10. Which shape is it closest to?
Q2Why should you wait for a candle to close before acting on it?

Key points to remember

  1. A candlestick shows open, high, low and close for one period.
  2. Body = open to close; wicks = the extremes that were reached.
  3. Close above open is bullish, close below open is bearish; colours are a display setting.
  4. Patterns are hints about who controlled the period — they need context and confirmation.
  5. Never act on a candle before its period closes.

Frequently asked questions

Why are they called candlesticks?

The thick body and thin wicks look like a candle with a wick at either end. The technique is widely attributed to Japanese rice traders, which is why they are often called Japanese candlesticks.

Do candlestick patterns work?

They describe the balance between buyers and sellers, which is useful context. On their own, they are not reliable trading signals; most traders combine them with trend, levels, volume and a defined stop.

What is the difference between a candlestick and an OHLC bar?

They show exactly the same four prices.2 An OHLC bar uses small ticks for open and close; a candlestick fills the space between them with a coloured body.

Further learning

  • Trading Chart

    The full guide to reading a chart: axes, timeframes and scales.

  • Support and Resistance

    The levels that give candle patterns their meaning.

  • Volume

    How participation confirms what candles suggest.

  • Trend

    The bigger picture a single candle sits in.

Sources

This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.

  1. Charles Schwab. How to Read Stock Charts and Trading Patterns (opens in a new tab) Checked .
  2. CME Group. Chart Types: candlestick, line, bar (opens in a new tab) Checked .
  3. StockCharts ChartSchool. Support & Resistance (opens in a new tab) Checked .
  4. Fidelity. How to read a crypto chart (opens in a new tab) Checked .
  5. Charles Schwab. How to Use Heikin Ashi Charts (opens in a new tab) Checked .

Read more elsewhere

Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. Trading Metrics is our sister site, under the same ownership; we are not affiliated with any other publisher linked above. Last reviewed . Report an error or request a source credit.