How to Read Candlestick Charts: A Beginner's Guide

Candlestick charts are the most common way traders display price. Each “candle” packs four numbers (the open, high, low and close for a period) into one shape, so you can see at a glance who was in control: buyers or sellers. This guide explains how to read a single candle, the handful of patterns worth knowing, and why no pattern should be treated as a signal on its own.

Where candlestick charts come from

Candlestick charting is usually traced to rice traders in 18th-century Japan. It became widespread in Western markets in the early 1990s, largely through the books of analyst Steve Nison, and is now the default chart type on most trading platforms.

Anatomy of a candle

Every candle covers one period: one minute, one hour, one day or one week, depending on the chart setting.

• Body: the thick part, drawn between the opening and closing prices.
• Colour: green (or hollow) when the close is above the open, red (or filled) when the close is below the open.
• Wicks (also called shadows): the thin lines above and below the body. The top of the upper wick is the period’s high; the bottom of the lower wick is its low.

Colours are a convention, not a rule. In mainland China and some other Asian markets, red means up and green means down, so check the legend when you use an unfamiliar platform.

Reading the shape

• Long body, short wicks: one side controlled the whole period. A long green body means buyers pushed the price up and held it there.
• Small body, long wicks: prices swung widely but ended near where they started, a sign of indecision.
• Long lower wick: sellers pushed the price down during the period, but buyers pushed it back up before the close.
• Long upper wick: buyers pushed the price up, but sellers took it back down.

Common single-candle patterns

Pattern	What it looks like	What traders read into it
Doji	Open and close almost equal, so the body is a thin line	Indecision; watch the next candle
Hammer	Small body at the top, lower wick at least twice the body	Possible bottoming after a decline
Shooting star	Small body at the bottom, long upper wick	Possible top after a rise
Marubozu	Long body with little or no wick	Strong one-sided pressure

Common multi-candle patterns

• Bullish engulfing: after a decline, a green candle whose body completely covers the previous red body. Buyers overwhelmed the prior selling.
• Bearish engulfing: the mirror image after a rise: a red body swallowing the previous green one.
• Morning star: three candles at the end of a decline: a long red candle, a small candle that gaps lower, then a long green candle. It suggests the fall is losing force.
• Evening star: the reverse at the top of a rise.

Context matters more than the pattern

The same shape means different things in different places. A hammer after a long fall, near a level where the price has bounced before and on heavy volume, carries more weight than a hammer in the middle of a sideways range on thin volume. Before acting on a pattern, most traders check:

1. The trend: is the pattern appearing where a reversal would make sense?
2. Support and resistance: is the price near a level that mattered before?
3. Volume: did more shares or contracts than usual trade during the candle?
4. Confirmation: does the next candle move in the direction the pattern suggests?

Candlestick patterns describe what happened; they do not predict what will happen. Treat them as one input alongside the trend, fundamentals and your own risk limits. Our quote charts also show a 20-period moving average and the 14-day RSI, two indicators that are often read together with candles.

Choosing a timeframe

Longer timeframes filter out noise. A daily or weekly chart shows the bigger picture; one-minute and five-minute charts are mainly used by day traders and produce many more false patterns. A common approach is to identify the trend on a longer chart, then time entries on a shorter one.

Frequently asked questions

Are candlestick charts better than line charts?

They show more information. A line chart usually connects only the closing prices, while a candle also shows the open, high and low. For a quick view of the trend, a line chart is often enough; that is what our Markets page uses for its mini charts.

Which candlestick pattern is the most reliable?

None is reliable on its own. Studies of candlestick patterns give mixed results, and success depends heavily on market, timeframe and context. Use patterns to frame questions, not to make decisions.

What does a candle with no body mean?

That is a doji: the period opened and closed at almost the same price. It signals a balance between buyers and sellers. Terms like RSI, moving average and volatility are explained in our glossary.