How to Read Candlestick Charts: A Beginner's Guide

The anatomy of a candle

Each candlestick shows four prices for one period: the open, high, low and close. The thick body spans the open and close. The thin wicks (or shadows) reach the high and low.

• A bullish candle closes above its open (usually green or hollow).
• A bearish candle closes below its open (usually red or filled).

What the shape tells you

• Long body, small wicks: one side controlled the whole period.
• Long lower wick: sellers pushed price down, but buyers pushed it back. That's rejection of lower prices.
• Small body, long wicks both sides (doji): indecision.

Five patterns worth knowing

Pin bar (hammer or shooting star)

A small body with one long wick at least twice its length. At support, a long lower wick shows buyers stepping in.

Engulfing

A candle whose body completely covers the previous body in the opposite direction, showing a sharp shift in control.

Inside bar

A candle whose range sits inside the previous one: a pause that often comes before a breakout.

Morning and evening star

Three-candle reversal patterns: a strong move, a small indecision candle, then a strong move the other way.

Doji

Open and close at almost the same price. Meaningful only after a strong move or at a key level.

Location beats pattern

A perfect hammer in the middle of nowhere means little. The same hammer at support, in the direction of the trend, is a real setup. Always ask where the pattern formed and what the bigger trend is. Our Technical Analysis Fundamentals course covers support, resistance and market structure.

Timeframes

The same price action looks different on different timeframes. Daily candles carry more weight than 5-minute candles. Many traders find setups on the daily or 4-hour chart and time entries on a lower one.

Practise it

Go back through a chart and mark every pin bar and engulfing candle at a clear level, then note what happened next. When you're ready to trade a pattern, size it with the position size calculator.