The Building Blocks of Every Chart
Every chart you’ll ever read — whether it’s a stock, a futures contract, or a cryptocurrency — is made up of candlesticks. Each candle represents a specific period of time and tells you four critical pieces of information about what happened during that period: where price opened, where it closed, the highest point it reached, and the lowest point it fell to.
That’s it. Four numbers. But combined visually, those four numbers reveal the story of the battle between buyers and sellers during that time period — and that story repeats itself in recognisable patterns.
Anatomy of a Candlestick
A candlestick has two main parts: the body and the wicks (also called shadows or tails).
What Does a Candlestick Actually Tell You?
Think of each candle as a mini tug-of-war result. Buyers are trying to push price up, sellers are trying to push it down. The shape of the candle at the end of the period tells you who won — and by how much.
A large green body with small or no wicks — buyers dominated completely. Strong bullish momentum, very little pushback from sellers.
A large red body with small or no wicks — sellers dominated completely. Strong bearish momentum, buyers couldn’t push back.
A small body with long wicks on both sides — neither side could hold gains. The market is confused and undecided. Often seen before a big move or reversal.
The Four Key Prices
- Open — the price at the very start of the time period
- High — the highest price reached during the period (top of the upper wick)
- Low — the lowest price reached during the period (bottom of the lower wick)
- Close — the final price at the end of the period (the most important of the four)
The close is considered the most important price because it reflects the final consensus of buyers and sellers at the end of the period. Where traders decide to hold or exit is the most meaningful signal.
Timeframes — One Candle, Many Meanings
A candlestick chart can be set to any timeframe. The candle shape and meaning is the same, but each candle now represents a different length of time:
Why Candlesticks Beat Bar Charts
Candlesticks were invented in Japan in the 18th century by rice traders. They became popular in Western technical analysis in the 1990s because they give you the same information as a traditional bar chart, but in a format that’s much easier to read visually at a glance. The colour-coded body makes it instantly obvious whether buyers or sellers won each period — without having to work it out from the numbers.
Important: A single candle is rarely enough to make a trading decision on its own. Candlestick patterns are most powerful when they appear at a key area of support or resistance, at the end of a clear trend, or when confirmed by volume or another indicator.
Ready to Learn the Patterns?
Now that you understand what each candle represents, you’re ready to start reading patterns — combinations of candles that have historically preceded predictable moves in price.