Candlestick charts are the most popular way to visualise price data, and for good reason. Each candle tells a story about the battle between buyers and sellers during that time period. Learning to read candlesticks is arguably the single most important skill in technical analysis.
Concept: Anatomy of a Candlestick
Every candlestick has four data points: the open, high, low, and close. The thick part in the middle is called the body. It shows the range between the open and close. If the close is above the open, the candle is bullish (typically shown as green or hollow). If the close is below the open, it is bearish (typically red or filled).
The thin lines extending above and below the body are called wicks (or shadows). The upper wick shows the highest price reached during that period. The lower wick shows the lowest. Together, they reveal the full range of the battle — how far price explored in each direction before the candle closed.
What the Body Size Tells You
A large body means strong conviction. If you see a big green candle with a full body, buyers were in complete control from open to close — there was no significant pushback from sellers. A large red body shows the opposite: sellers dominated the entire session.
A small body indicates indecision. Buyers and sellers were roughly equal in strength, and the close ended up near the open. Small-bodied candles at key levels often precede significant moves — the market is coiling like a spring, and a breakout in either direction could follow.
What the Wicks Tell You
Long wicks are the single most important feature to watch. A long lower wick means price dropped significantly during the period but buyers stepped in and pushed it back up. This is a sign of buying pressure and rejection of lower prices. The longer the wick relative to the body, the stronger the rejection.
A long upper wick tells the opposite story — price rallied but sellers pushed it back down. At resistance levels, long upper wicks are warning signs that the level is being defended. At support levels, long lower wicks are signs that buyers are stepping in.
Example: Key Single-Candle Patterns
- Hammer: Small body at the top, long lower wick (at least twice the body length), little or no upper wick. Found at the bottom of downtrends. Says: "Sellers tried to push lower but buyers overwhelmed them."
- Shooting Star: Small body at the bottom, long upper wick, little or no lower wick. Found at the top of uptrends. Says: "Buyers tried to push higher but sellers slammed them back down."
- Doji: Open and close are virtually the same (tiny or no body) with wicks on both sides. Says: "Complete indecision. Neither side won. Something is about to change."
- Marubozu: Full body with no wicks at all. Open equals the low and close equals the high (bullish) or open equals the high and close equals the low (bearish). Says: "One side was in total control. Zero resistance from the other side."
Context Is Everything
A hammer in the middle of a range means almost nothing. A hammer right at a major support level after a prolonged decline is a powerful signal. Always ask: where is this candle forming? What happened before it? What is the bigger trend?
Volume adds another layer of meaning. A bullish engulfing candle on high volume is far more significant than one on low volume. If the tools are available to you, always check whether a strong candle is backed by genuine participation or just a few orders in a thin market.
Warning: Do Not Memorise 50 Patterns
Many books list dozens of exotic candlestick patterns with Japanese names. You do not need to memorise all of them. Focus on understanding what wicks and bodies mean, learn the four or five most common patterns, and read them in context. Understanding the logic behind candles is far more valuable than memorising a catalogue of shapes.