Explainer
How to read candlesticks (for beginners)
A candlestick shows one period’s open, high, low and close: the body runs from open to close and the thin wicks reach out to the high and the low.
Updated
One candle, four prices
A candlestick is a picture of what price did during one period. The period can be one minute, one hour or one day. Every candle records the same four prices, and once you can find them, you can read any chart.
The thick part is the body. It runs from the open to the close. The thin lines above and below are the wicks, sometimes called shadows or tails. They reach out to the high and the low of the period.
- Open
- The first price traded in the period.
- High
- The highest price traded in the period.
- Low
- The lowest price traded in the period.
- Close
- The last price traded in the period.
- Body
- The thick part of the candle, from the open to the close.
- Wick
- A thin line above or below the body, out to the high or the low.
Reading the body
The body tells you where the period ended compared with where it started. If the close is above the open, price rose over the period. If the close is below the open, price fell. A long body means price travelled a long way from open to close. A short body means it finished near where it began.
The body does not tell you the path. A long body could be a steady climb or a drop followed by a bigger rise. The candle keeps four prices and drops the order they happened in.
Reading the wicks
A wick shows a price that was reached and then left. A long upper wick means price pushed up during the period and came back before the close. A long lower wick means it pushed down and came back.
Traders often read long wicks as a sign that a price was turned away. That is a way of reading the picture, not a rule. It is worth knowing what a wick is before you decide how much weight to give it.
Read a candle as a record of what price did in one period, not as a promise of what comes next.
Colour is a convention
Most platforms colour candles by direction: one colour when the close is above the open and another when it is below. Green and red are common. White and black, or hollow and filled, are also used.
The choice is the platform’s, and it can be changed. Some charts even colour a candle by whether it closed above the previous candle’s close, not above its own open. Check what your chart uses before you read the colours.
The timeframe changes the picture
The same stretch of market looks different on different timeframes. A daily candle is a summary of every 1-minute candle inside it. It keeps four prices. The 1-minute candles keep the order the market moved in.
That is why a pattern on a daily chart can look like a different story on a 5-minute chart. Neither one is the true view. They answer different questions.
What a candle cannot tell you
A single candle does not tell you why price moved, who was buying, or what the next candle will be. Patterns made of several candles have names, and people use them, but a name is not a forecast.
If you want to know whether a candle pattern has led to anything, the honest way is to write the pattern as an exact rule and count what happened after it on past data.
The futures angle
On futures charts, a bar is labelled by the time it opens, and all of our clock times are America/New_York. Our data is 1-minute bars, and the Trade Lab can show them as 1-minute, 5-minute, 15-minute, 1-hour, 4-hour or daily candles, built from the 1-minute bars.
A new contract month can open at a different price from the old one. In the Trade Lab the first bar of a new contract is marked on a roll, so a gap that comes from the roll is not mistaken for a move. Replay it on real NQ data, free, in the Trade Lab.
Questions and answers
What do the four parts of a candlestick mean?
The body runs from the open to the close. The wicks reach out to the high and the low of the period.
What does a long wick mean on a candle?
Price reached that level during the period and was back away from it by the close. Traders read it as a price that was turned away, but it is a reading of the picture, not a rule.
What does the colour of a candle mean?
Usually the direction of the period: one colour when the close is above the open and another when it is below. The colours are the platform’s choice, so check your chart’s settings.
Can I trade from candlesticks alone?
Candles show what price did. They do not show why or what comes next. If you plan to use a candle pattern, write it as an exact rule and test it on past data first.
What timeframe should a beginner use to read candles?
There is no single answer. A longer timeframe shows less detail and a shorter one shows more. Pick the one that matches how long you plan to hold, and look at the others to see what changes.