Open almost any trading platform and the default chart is made of candlesticks. To a beginner they look like coloured bars with lines sticking out. Once you know how to read candlestick charts, each one tells a small story about the battle between buyers and sellers. This guide covers everything you need to read them properly — and the rule beginners break most often.
What is a candlestick chart?
A candlestick chart shows price movement over time, with each candle representing one period — one minute, one hour, one day, whatever timeframe you've selected. Candlestick charting originated with Japanese rice traders and was popularised among Western traders by Steve Nison's 1991 book Japanese Candlestick Charting Techniques.
Compared with a simple line chart, which usually only plots closing prices, a candlestick shows four prices for every period.
The four prices in every candle (OHLC)
Every candle is built from:
- Open — the price at the start of the period.
- High — the highest price reached during the period.
- Low — the lowest price reached.
- Close — the price at the end of the period.
Together they're called OHLC.
Anatomy of a candlestick
The body
The thick part of the candle runs between the open and the close.
- Bullish candle (often green or white): the close is above the open — price rose over the period. The bottom of the body is the open, the top is the close.
- Bearish candle (often red or black): the close is below the open — price fell. The top of the body is the open, the bottom is the close.
Colours are customisable on every platform, so always confirm which colour means what on yours.
The wicks (shadows)
The thin lines above and below the body are wicks (or shadows).
- The upper wick reaches the period's high.
- The lower wick reaches the period's low.
Wicks show where price went but couldn't stay. A long upper wick means buyers pushed price up, but sellers pushed it back down before the close. A long lower wick means the opposite.
Reading what a candle is telling you
Think of each candle as the result of a contest:
| Candle shape | What it suggests happened |
|---|---|
| Large body, small wicks | One side was in control for most of the period |
| Small body, long wicks both sides | Indecision — both sides pushed, neither won |
| Long lower wick, body near the top | Sellers pushed down, but buyers took control by the close |
| Long upper wick, body near the bottom | Buyers pushed up, but sellers took control by the close |
"Suggests" is doing real work there. A single candle is evidence, not proof.
Five candlestick patterns worth knowing
There are dozens of named patterns. Beginners do better learning a handful well.
1. Doji
Open and close are at (or very near) the same price, so the body is a thin line. It signals indecision. A doji after a strong move can mean momentum is fading — or nothing at all in a sideways market.
2. Hammer
A small body near the top of the candle with a long lower wick (often at least twice the body's length). Appearing after a decline, it shows sellers pushed price lower but buyers drove it back up — a possible sign of a turn higher.
3. Shooting star
The mirror of the hammer: small body near the bottom, long upper wick, appearing after a rise. Buyers pushed up but failed to hold the gains.
4. Bullish and bearish engulfing
A two-candle pattern. A bullish engulfing is a bearish candle followed by a larger bullish candle whose body completely covers the previous body. The bearish engulfing is the reverse. It shows a decisive shift in control from one side to the other over two periods.
5. Inside bar
A candle whose high and low sit entirely within the previous candle's range. It signals contraction — the market pausing — and traders often watch for a break of the inside bar's high or low.
The rule beginners break: wait for the close
A candle isn't finished until it closes. A candle that looks like a perfect hammer halfway through the hour can close as something completely different. Until the close, its shape is a guess.
Many beginner losses come from entering on a candle that "looks like" a signal and then changes. Write this into your trading plan: signals only count on a closed candle.
Context beats patterns
A hammer in the middle of a choppy range means very little. The same hammer at a well-defined support zone, in an uptrend, after a pullback, means a lot more. Before reading any pattern, ask:
- Where is it? At a meaningful level, or in the middle of nowhere? (See how to draw support and resistance levels.)
- What's the trend? Is the pattern with the higher-timeframe direction or against it?
- What timeframe? A daily candle represents far more trading activity than a one-minute candle.
Choosing a timeframe
Each candle's period is set by the chart timeframe. Higher timeframes (4-hour, daily) produce fewer, more meaningful candles; lower ones (1–5 minutes) produce many more and much more noise. Many traders use a higher timeframe to read direction and a lower one to time entries.
Frequently asked questions
What do green and red candles mean?
By default, green (or white) candles closed higher than they opened, and red (or black) candles closed lower than they opened. Colours can be changed in your platform settings.
Which candlestick pattern is the most reliable?
No single pattern is reliable on its own. Patterns become more meaningful in context — at key levels, in line with the trend, and on a closed candle. Be sceptical of anyone quoting precise success rates for patterns without published evidence.
What timeframe is best for candlestick charts?
There's no best timeframe — it depends on how long you hold trades. Beginners often find higher timeframes like the 1-hour or 4-hour easier to read because there's less noise.
What is the difference between a wick and a body?
The body shows the range between the open and close. The wick shows the extremes — the high and low — that price reached but didn't close at.
Are candlestick charts good for beginners?
Yes. They show more information than line charts at a glance and are the standard on most platforms. Learn the anatomy first, then a few patterns, and always read them in context.
Key takeaways
- Every candle shows open, high, low and close.
- Bodies show who won the period; wicks show where price was rejected.
- Learn a few patterns well: doji, hammer, shooting star, engulfing, inside bar.
- Only act on closed candles, and always read patterns in context.
Go further: Candlesticks: Reading the Story of Price is a full lesson in Module 1 of the free Trovia Academy, with chart examples — create a free account to start. To see how candles are read in real time, join the free Telegram community — or book a free strategy call if you'd like help applying this to your own charts.
Educational content only — not financial advice. CFDs and other leveraged products are complex and carry a high risk of losing money rapidly. Read our risk warning.