Concept
How to Read a Candlestick
A candlestick summarises four numbers for one time period: the open, the high, the low and the close. The body spans open to close; the wicks extend to the extremes reached during the period.
How to read it
- The body shows where the period started and finished. A long body means open and close were far apart; a short body means they finished close together.
- Wicks show the extremes that were reached but not held at the close. A long lower wick means price traded well below where it settled.
- Colour is a convention indicating whether the close was above or below the open. It carries no information beyond that comparison.
What it does not tell you
- A candle discards everything about the path taken. Two identical candles can come from completely different sequences of trading within the period.
- The shape depends entirely on the timeframe. The same movement produces different candles on a 5-minute chart than on a daily one, and neither is more correct.
- A single candle is four numbers. Claims that it reveals sentiment or intent are interpretation layered on top of a very small amount of data.
Frequently asked questions
What do the wicks on a candlestick mean?
They mark the highest and lowest prices traded during the period. A long wick means price reached that level but did not finish there.
What does a long body indicate?
That the open and close were far apart, so the period finished well away from where it started. It says nothing about how price moved in between.
Does candle colour matter?
It only encodes whether the close was above or below the open, which you could read from the body position anyway. It is a display convention.
Which timeframe should I read candles on?
That depends on the period you care about, and no timeframe is inherently more valid. The same movement produces entirely different candles at different intervals.
Related
- Doji Candle — Concept
- Hammer and Hanging Man — Concept
- Engulfing Patterns — Concept
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.
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