Candlestick charts are the most popular way to visualize price movement in trading. Once you know how to read them, you can instantly see what buyers and sellers are doing at any point in time. This guide explains everything from scratch.
A candlestick is a visual representation of price movement over a specific time period — whether that's 1 minute, 1 hour, 1 day, or any other timeframe. Each candle shows four pieces of information:
A candlestick has two main parts:
The rectangular body represents the range between the open and close price. A bullish candle (price went up) is typically green or white — the close is higher than the open. A bearish candle (price went down) is typically red or black — the close is lower than the open.
The thin lines above and below the body are called wicks or shadows. The upper wick shows the highest price reached. The lower wick shows the lowest price reached. Long wicks indicate that price moved significantly in that direction but was rejected and pulled back.
A bullish candle closes higher than it opened — buyers were in control during that period. The longer the body, the stronger the buying pressure. A long bullish candle with small wicks shows strong, sustained buying with little pushback from sellers.
A bearish candle closes lower than it opened — sellers were in control. A long bearish candle with small wicks shows strong, sustained selling pressure. These often appear at the start of downtrends or after a resistance level is hit.
A doji has a very small body where the open and close are nearly equal. It signals indecision in the market — neither buyers nor sellers won the period. A doji after a strong trend can signal a potential reversal.
A hammer has a small body at the top and a long lower wick — at least twice the length of the body. It appears after a downtrend and suggests buyers rejected lower prices strongly. Often a bullish reversal signal.
The opposite of a hammer — small body at the bottom, long upper wick. Appears after an uptrend and signals that sellers pushed price back down from the highs. Often a bearish reversal signal.
A bullish engulfing pattern occurs when a large bullish candle completely engulfs the previous bearish candle. A bearish engulfing is the reverse. Both are strong reversal signals when they appear at key support or resistance levels.
Small body with wicks on both sides of similar length. Like the doji, it signals indecision. Neither buyers nor sellers had clear control during the period.
The same candlestick patterns appear on every timeframe — but their significance varies:
A bullish engulfing pattern on a daily chart is far more significant than the same pattern on a 1-minute chart.
Once you spot a trade setup using candlestick analysis, always check the risk/reward before entering. Use our Risk/Reward Calculator to make sure the trade is worth taking.