What is a candlestick chart?
Candlestick charts are the default chart type on most trading platforms, including ours. They are significantly more informative than a simple line chart, which shows only the closing price. Because each candle captures the full price action of a period, including the intraday battle between buyers and sellers, they are used across technical analysis in every asset class: shares, forex, commodities and indices.
How to read a single candlestick
The body
The body is the rectangular section between the open and close price. It tells you the net result of the period: who won, buyers or sellers, and by how much.
Green or white body: the close was above the open. Buyers won the period. The taller the body, the more decisive the victory.
Red or black body: the close was below the open. Sellers won the period.
Small body: the open and close were very close together. Neither side dominated; the period ended in relative indecision.
The upper wick
The upper wick is the thin line extending above the body's top. It shows the highest price the market reached during the period. A long upper wick means buyers pushed the price up significantly during the period, but sellers pushed it back down before the close. This is called a price rejection: the market tried to go higher but was rejected.
The lower wick
The lower wick extends below the body. It shows the lowest price reached during the period. A long lower wick means sellers pushed price down but buyers stepped in and recovered it before the close, also a rejection but of lower prices.
No wick
A candle with no wick (a 'marubozu') opened at the period's extreme and closed at the other. A full green marubozu opened at the low and closed at the high, showing buyers were in control from open to close with no counter-movement. It signals strong directional conviction.
Candlestick patterns: the basics
Individual candlestick patterns are most useful when they appear at significant price levels, such as a support or resistance level, a recent swing high or low, or a key moving average. A pattern forming in the middle of a range has far lower probability than the same pattern at a price level the market has previously reacted to. The concept of price action strategy explains how these patterns fit into a broader trading framework.
Doji
A doji forms when the open and close are at or near the same price. The body is tiny or non-existent, with wicks extending in both directions. It signals pure indecision: neither buyers nor sellers achieved a meaningful result. A doji is most significant when it appears after a strong directional move, suggesting that momentum is stalling. A doji in the middle of a ranging market has little analytical value.
Hammer
A hammer has a small body near the top of the candle's range and a long lower wick, typically at least twice the length of the body. It forms during a downtrend and signals that sellers pushed the price down significantly during the period but buyers stepped in strongly to recover it near the open. The long lower wick represents the rejection of lower prices. A hammer at a known support level or in an oversold market is one of the more reliable bullish reversal signals in candlestick analysis.
Shooting star
The shooting star is the mirror image of the hammer. It has a small body near the bottom of the range with a long upper wick. It forms during an uptrend and signals that buyers pushed the price up strongly but sellers overwhelmed them and pushed it back down. The long upper wick is a rejection of higher prices. A shooting star at a known resistance level is a bearish reversal signal, one of the patterns used in
Three-candle patterns
Morning star
A three-candle bullish reversal pattern: a large red candle, followed by a small-bodied candle that gaps slightly lower (the 'star'), then a large green candle that closes well into the body of the first red candle. The small middle candle represents indecision after a bearish move; the third candle confirms that buyers have taken control. The morning star is one of the highest-probability candlestick reversal patterns when it forms at a major support level.
Evening star
The bearish counterpart to the morning star. A large green candle is followed by a small-bodied star candle, then a large red candle that closes well into the first candle's body. It signals the exhaustion of an uptrend and is most significant at resistance levels that have previously turned the market lower.
Three white soldiers / three black crows
Three consecutive full-bodied candles in the same direction. Three white soldiers (three green candles each closing at or near the high) is a strong bullish continuation signal after a period of consolidation. Three black crows is the bearish equivalent. These patterns carry high reliability in trending markets but can produce false signals in choppy or ranging conditions.
Candlestick timeframes
Candlestick patterns appear on any timeframe, from 1-minute charts to monthly charts. Higher timeframes produce more reliable patterns because each candle contains more price data and thus provides a stronger signal about market conviction. The same hammer on a daily chart is significantly more meaningful than on a 5-minute chart, where it can be created by routine intraday noise.
Most swing traders and position traders work primarily from daily and four-hour charts. Day traders often use 15-minute or 1-hour candles. Whatever timeframe you use, always check the higher timeframe context first: a bearish candlestick pattern on a 1-hour chart in the middle of a strong daily uptrend has much lower probability than the same pattern in a daily downtrend. This contextual analysis is the same principle applied in stop loss and take profit placement: the timeframe of the trade determines where levels should be set.
Candlestick chart FAQs
How do you read a candlestick chart?
Each candlestick shows four prices for the period: open, high, low and close. The body (the rectangle) shows the range between open and close. A green or white body means the close was above the open (buyers won). A red or black body means the close was below the open (sellers won). The wicks above and below show how far the price moved beyond the open and close before being pushed back.
What is the most reliable candlestick pattern?
No candlestick pattern is reliable in isolation. Reliability increases significantly when a pattern appears at a technically significant level (support, resistance, key Fibonacci retracement) and is confirmed by volume or other indicators. The bullish and bearish engulfing patterns and the hammer/shooting star are among the most watched, but their value comes from context, not from the pattern alone.
What does a doji candle mean?
A doji forms when the open and close are at or very near the same price, creating a tiny body with wicks extending in both directions. It signals indecision: neither buyers nor sellers won the period. A doji after a strong directional move, particularly at a key support or resistance level, can warn that momentum is stalling and a reversal may be approaching.
What timeframe is best for candlestick trading?
Daily and four-hour charts produce the most reliable candlestick patterns for swing traders because each candle contains more price data and institutional order flow. Day traders commonly use 15-minute charts. Start with higher timeframes where patterns are clearer and less prone to noise, then use shorter timeframes to refine entry timing.
