Candlestick charts
Beginner · 1 min
A candlestick chart looks busy until you realise every shape on it is saying the same four things. Learn to read one candle and you can read the whole chart.
A chart has to squeeze a whole day of trading into a small space. A candlestick does it by recording only four prices: where trading started, where it finished, the highest it got and the lowest. Everything about the shape comes from those four numbers.
- candlestick
- One shape on the chart, covering a fixed slice of time — usually a day. It records four prices for that slice: where trading opened, where it closed, the highest it reached and the lowest.
- wick
- The thin line sticking out above or below the thick part. It marks a price the share reached during the day but did not stay at.
The thick part is called the body, and it spans the opening and closing prices. It is coloured green when the close was above the open, and red when it was below. The wicks show how far the price travelled beyond that in each direction before coming back.
In this topic
The colour gives you the direction and the size gives you the conviction.
Beginner · 1 min
A few shapes show up often enough at turning points to be worth recognising.
Intermediate · 1 min
Try this in the app
- Research — open a share and look at its chart
Share this lesson
Works with
- Support and resistance — Prices where a share has repeatedly stopped falling, or stopped rising.
- Trends — A share in a trend keeps making higher highs, or lower lows — and most of the time it is doing neither.
- The hammer candle — A small body on a long lower wick, after a fall — and why one candle is never the whole story.
- Trading a hammer — Enter on the confirming close, put the stop under the hammer's low, and size the trade so that stop costs what you planned.
- Candles that warn of a top — Three single-day shapes that show buyers losing control near a high — and the rule that confirms any of them.
- The hanging man — A small body on a long lower wick, after a rise — the same shape as a hammer, in the opposite place.
- Bearish engulfing — A red candle that swallows the green one before it completely — the bigger the swallow, the more attention it gets.