Candlestick

Candlestick charts originated in Japan and are now the default chart type on most trading platforms. Each candle summarises one period, whether that is one minute, one hour or one day.

Reading a candle

• Body: the range between the open and the close. If the close is above the open, the candle is bullish (often green or white). If below, bearish (often red or black).
• Upper wick (shadow): from the top of the body to the period's high.
• Lower wick: from the bottom of the body to the period's low.

Worked example

An hourly EUR/USD candle opens at 1.0850, trades up to 1.0872, down to 1.0841 and closes at 1.0866. The body runs from 1.0850 to 1.0866 (16 pips, bullish), the upper wick from 1.0866 to 1.0872 and the lower wick from 1.0850 down to 1.0841. The total range is 31 pips.

Patterns and their limits

Traders give names to recurring shapes: doji (open and close almost equal), hammer and pin bar (long lower or upper wick), engulfing (one body covering the previous one). These describe what happened during the period, for example that buyers pushed back strongly from the low. They are not reliable predictions on their own, and their meaning depends on where they appear relative to support and resistance.

Practical notes

Candles depend on the timeframe and on the broker's daily close time, so the same market can show different daily candles on different platforms. Most charts plot the bid price. See how to read candlestick charts and price action trading.