Reading candlestick charts
Candlestick charts show how price moved during a selected period, not just where it finished. In this first intermediate lesson, you will learn to read candle bodies and wicks, compare common formations, and separate observable price information from interpretations that need further context.
What a candle records
Each candlestick summarises four prices for one period: the open, high, low and close, often shortened to OHLC. On a one-hour chart, each completed candle represents one hour of price activity. The body connects the opening and closing prices. The thin lines above and below it, called wicks or shadows, extend to the highest and lowest recorded prices.
A bullish candle closes above its opening price; a bearish candle closes below it. Platforms often display these as green and red, but colours are customisable, so check your chart settings. A candle is a summary rather than a complete history: it does not show every price movement or whether the high occurred before the low. Different price paths can produce identical candles.
Reading bodies and wicks
The body shows the net change between open and close, while the full range measures the distance from high to low. A relatively large body indicates a substantial directional move within that period. A small body shows that the opening and closing prices were close together. Compare size with nearby candles: a candle that looks large on one chart may be ordinary on another.
A long upper wick means price reached higher levels but closed below the high. A long lower wick means price reached lower levels but closed above the low. Traders sometimes describe these movements as rejection, but that is an interpretation, not proof of what comes next. Wicks alone cannot identify who traded, why they acted, or whether the same response will occur again.
Worked example: EURUSD
Consider a hypothetical completed EURUSD candle with an open of 1.0800, a high of 1.0830, a low of 1.0790 and a close of 1.0820. For EURUSD, one pip is 0.0001. The candle is bullish because the close is above the open. Its body measures 20 pips, and its full high-to-low range measures 40 pips.
The upper wick measures 10 pips, from 1.0820 to 1.0830. The lower wick also measures 10 pips, from 1.0790 to 1.0800. Together, the two wicks and body account for the 40-pip range. The close lies in the upper half of that range, but this does not guarantee another rise. These measurements describe the candle; they are not a trading result or recommendation.
Patterns need context
Common formations provide a vocabulary for comparing candles. A doji has an open and close that are equal or very close, although its wicks may be long or short. An engulfing formation occurs when one candle’s body covers the previous candle’s body; the wicks do not necessarily need to be covered. Definitions can vary, so use a consistent rule when reviewing examples.
A hammer-like candle has a small body near the top of its range and a long lower wick. After a decline, traders may interpret it as a possible sign that downward pressure is weakening. However, the same shape can have a different meaning elsewhere. Consider the preceding move, nearby price levels and subsequent candles. Even a later move supporting the interpretation does not make it certain.
A practical reading routine
In MT5, select the candlestick chart view and check the symbol and timeframe before analysing shapes. Start with completed candles: the latest candle’s body and wicks can change until its period ends. Read its direction, body size, range and wick proportions, then compare those features with neighbouring candles. A short note separating facts from interpretation can help keep your observations clear.
Next, review a broader timeframe to see where the candle sits within a larger move. A bullish five-minute candle can occur inside a bearish hourly candle, so these views are not necessarily contradictory. Chart prices may also differ from executable prices because bid and ask prices differ. Candlesticks do not remove execution risk or control losses. CFDs are leveraged products and carry a high risk of loss.
- Each candle summarises open, high, low and close for one period.
- Bodies and wicks describe price movement, not guaranteed future direction.
- Interpret patterns alongside neighbouring candles, timeframes and price levels.
- Next: use support, resistance and trends to build chart context.