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How to read a candlestick chart

The chart most traders use, explained from scratch. You will learn what each candle shows, how to read a whole chart step by step, and which mistakes to avoid. No experience needed.

5-minute readChartsUpdated October 2026

What one candle shows

A candlestick packs four prices from one period into a single shape. The period can be a minute, a day, a week or a month. The four prices are always the same:

  • Open: the price when the period started.
  • Close: the price when the period ended.
  • High: the highest price reached.
  • Low: the lowest price reached.
Two candles. The green one closes above its open, the red one closes below its open. Both show the high at the top of the upper wick and the low at the bottom of the lower wick.
Left: a green candle, where the close is above the open. Right: a red candle, where the close is below the open.

The thick part is the body. It runs from the open to the close. The thin lines are the wicks, also called shadows. They reach up to the high and down to the low.

A line chart joins only the closing prices. A candlestick chart shows all four, so you can see how far price moved during the period and which side ended up in control. Until a period ends, its last candle keeps changing: its "close" is simply the latest price.

What green and red candles mean

The colour tells you who won the period. A green candle closed higher than it opened, so buyers won. A red candle closed lower than it opened, so sellers won. Some charts use white and black instead. The meaning does not change.

Look at the size of the body as well. A tall body means one side won clearly. A tiny body means price ended about where it started.

What wicks tell you

A wick shows where price went but could not stay. A long upper wick means buyers pushed price up and sellers pushed it back down before the close. A long lower wick is the opposite: sellers pushed price down and buyers stepped in.

Say a daily gold candle opens at $4,300, drops to $4,220 during the day and closes at $4,310. The body is small and green. The long lower wick tells you buyers refused the lower prices.

Read a wick as a rejected price. The market visited that level and did not stay there, at least for now.

How to read a candlestick chart, step by step

  1. Check what you are looking at. Read the market name and the timeframe first. Is each candle an hour, a day or a week?
  2. Find the trend. Zoom out. Are the highs and lows rising, falling or moving sideways?
  3. Look at the latest candles. Are the bodies growing or shrinking? Big bodies show conviction. Small ones show hesitation.
  4. Read the wicks at key prices. Long wicks near an old high or low show where buyers or sellers pushed back.
  5. Decide what would prove you wrong. Before you act on any chart, know the price at which you would get out.

Which timeframe to use

The same market looks very different depending on how much time each candle covers. On a 1-hour chart, one bad afternoon can look like a disaster. On a weekly chart, that afternoon disappears inside a single candle.

Beginners usually learn faster on daily or weekly charts. They move more slowly and filter out most of the noise. A good habit: start on the weekly chart, then zoom in to the daily one.

From candles to trends: three real charts

One candle describes one period. A row of candles shows where the market is heading. In an uptrend, each high beats the last one and each dip stops higher than the one before. In a downtrend, highs and lows keep getting lower. Three real examples:

Weekly candlestick chart of US crude oil from May 2008 to February 2009: a peak near $145 in July, then a steep fall below $35 by December.
US crude oil (WTI), weekly, May 2008 to February 2009. A record weekly close near $145 in early July, then a steep downtrend to below $35 by December as the financial crisis hit.
Monthly candlestick chart of gold from June 2008 to September 2011, rising from about $760 to above $1,770 with higher highs and higher lows.
Gold, monthly averages, June 2008 to September 2011. After a dip in late 2008, a long run of higher highs and higher lows took gold from about $760 to above $1,770 an ounce.
Weekly candlestick chart of the US dollar against the Japanese yen in 2022, rising from about 115 to nearly 150, then falling back to about 132.
US dollar against the Japanese yen, weekly, 2022. The dollar climbed from about 115 to nearly 150 yen as US interest rates rose. Japan bought yen in September and October, and the dollar ended the year near 132.

Three patterns worth knowing

Traders give names to common candle shapes. A pattern describes what buyers and sellers did. It does not promise what happens next, so treat it as a hint that needs context. A pattern at a key level, in the direction of the trend, means more than the same shape in the middle of a range.

Doji

Open and close almost equal. Neither side won.

Hammer

Small body and a long lower wick after a fall. Buyers stepped in hard.

Engulfing

A big candle covers the whole body of the one before. The other side took over.

Beginner mistakes

  • Reading one candle on its own. A single candle says little without the trend around it.
  • Forgetting the timeframe. A "crash" on a 5-minute chart can be a tiny wiggle on the daily chart.
  • Treating patterns as promises. A hammer can fail. Decide where you would get out before you act.
  • Trading without a stop loss. Your exit plan matters more than your entry signal.
  • Using leverage too early. With CFDs and other leveraged products, a small move against you can wipe out your deposit. Practise with pretend money first.

FAQ

What do green and red candles mean?

A green candle closed higher than it opened, so buyers won that period. A red candle closed lower than it opened, so sellers won. Some charts use white and black instead, and most apps let you change the colours.

What do the wicks on a candle mean?

The wicks are the thin lines above and below the body. They mark the highest and lowest prices of the period. A long wick means price reached that level but was pushed back before the close.

Which timeframe should a beginner use?

Daily or weekly charts. They move more slowly, filter out a lot of noise and give you time to think.

Are candlestick patterns reliable?

They show what buyers and sellers did, but no pattern works every time. Experienced traders combine them with the trend, support and resistance, and strict risk limits.

Who invented candlestick charts?

They come from Japan's rice markets. The 18th-century rice merchant Munehisa Homma is often credited with early versions. Steve Nison's 1991 book made them popular with Western traders.

Do I need money to practise?

No. You can practise on real historical charts for free in Chart School, or on a broker's demo account with pretend money.

Sources: Charts use real prices: US crude oil, weekly (US Energy Information Administration); US dollar against the Japanese yen, weekly (US Federal Reserve); gold, monthly averages (World Bank). Educational content, not financial advice.

Now try it on real charts

Ten quick questions on real charts: the close, the trend, the highs and the lows.

Play Chart School

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