How to Read a Candlestick Chart

What a candlestick records: open, high, low and close

A candlestick chart is a price chart. Each candle covers one fixed period — a minute, an hour, a day — and holds four numbers:

• Open — the first price traded in the period.
• High — the highest price reached.
• Low — the lowest price reached.
• Close — the last price traded before the period ended.

The thick part is the body, running between the open and the close. The thin lines above and below are the wicks, or shadows, running out to the high and the low.

Colour is a convention, not information. Most platforms use green when the close is above the open and red when it is below, and both are settings you can change. Colour tells you which end of the body is the close, nothing more.

Reading the body and the wicks

The body shows how far apart the period started and finished. A long body means open and close ended far apart; a small body means price finished near where it began, whatever it did in between.

The wicks show ground that price covered and gave back. A long upper wick means price traded well above the close at some point and did not hold there.

A candle does not record the order in which prices were reached. One with long wicks on both sides could have risen first and then fallen, or the reverse; it looks identical either way. When the sequence matters, drop to a smaller timeframe and read the candles inside that period.

Choosing a timeframe on a candlestick chart

The same market looks different on every timeframe: one daily candle compresses the trading that fills twenty-four hourly candles into four numbers.

The day boundary comes from the platform’s server clock, not your local midnight, so a daily candle may open in the middle of your afternoon — see forex market hours and trading sessions for where those boundaries sit.

Match the timeframe to how long you intend to hold; a position meant to last days is not well judged on a one-minute chart. On the MT4 platform, switching timeframe redraws the same price history at a different resolution; nothing about the market has changed.

Common candlestick patterns and what they are called

Candles with distinctive shapes have names. A doji has its open and close at almost the same price, so the body is a thin line. A hammer is a small body above a long lower wick; a shooting star is that shape inverted. An engulfing candle has a body that completely covers the body before it.

These are descriptions of shapes that have already formed. Traders use them as shorthand when describing a chart. The same shape appears before moves in both directions, and past candles do not determine the next one. Treat the names as vocabulary, not as instructions.

What a candlestick chart leaves out

• The price you would get. Charts are drawn from the bid price. You buy at the ask, higher by the spread, so the close on screen is not your entry price. How to read a forex quote explains that gap.
• Weekend gaps. Monday can open away from Friday’s close, leaving a jump with no candles inside it.

Worked example: reading one EUR/USD daily candle

Take a daily EUR/USD candle: open 1.0850, high 1.0890, low 1.0835, close 1.0845.

The close is below the open, so the body is five pips tall and shaded in the platform’s down colour. The upper wick runs from 1.0850 to 1.0890: forty pips covered above the open and not held to the close. The lower wick runs down to 1.0835, ten pips.

Now the cost. Suppose you buy near 1.0845 with a typical spread of about one pip. You buy at the ask, near 1.0846, while the chart shows 1.0845. On 0.10 lots of EUR/USD one pip is worth about $1, so entering costs roughly $1 before price has moved at all.

If price then trades down to that low at 1.0835, ten pips are against you: about $10 off your balance, on top of the $1 you paid to enter. That wick looked small on screen. Candle size depends on your zoom; the money depends on pips and position size.

Key takeaways

• A candlestick records four prices — open, high, low and close — and nothing else.
• The body is the gap between open and close; the wicks show ground that price covered and gave back.
• A candle hides the order in which its prices were reached, so only a smaller timeframe shows the sequence.
• Pattern names describe shapes that have already formed; they are not a forecast of the next candle.

Common questions about candlestick charts

What is the difference between a candlestick chart and a line chart?

A line chart joins closing prices, so it shows one number per period. A candlestick shows four for the same period. The line is cleaner for the general path over months. The candles show the range inside each period, including moves reversed before the close.

Which timeframe should a beginner use?

Match it to how long you plan to hold. A position meant to last days is read on the daily or four-hour chart. One-minute charts move constantly and invite decisions that were never in your plan. Many beginners start on the daily chart: one new candle a day.

Do candlestick patterns predict what price will do next?

No. A pattern is a name for a shape that prices have already made. The same shape appears before moves in both directions, and past candles do not determine the next one. Traders use the names to describe charts and mark areas worth watching, then rely on their own rules for stop distance and size.