What Is a Candlestick Chart — And How to Read One
Candlestick charts are the language of trading. Every professional trader reads them intuitively. Here's a complete beginner's guide to reading price action.
Basics · July 9, 2026 · 5 min read
A candlestick chart displays price information using individual candles — each representing the open, high, low, and close price for a defined time period. One candle on a daily chart represents one full trading day. One candle on a 5-minute chart represents five minutes of trading. Candlestick charts originated in 18th century Japan, where rice traders used them to track market prices, and were introduced to Western financial markets in the late 1980s. Today they are the universal standard in active trading.
Anatomy of a Candle
Each candle has four data points: Open — the price at which the period began. Close — the price at which the period ended. High — the highest price reached during the period. Low — the lowest price reached during the period. The rectangular body of the candle spans from open to close. The thin lines extending above and below (called wicks or shadows) extend to the high and low. A green (or white) candle means the close was above the open — a bullish period. A red (or black) candle means the close was below the open — a bearish period.
Reading Candle Size and Shape
The size and shape of a candle tells you about the conviction behind a move. A large-bodied candle with tiny wicks shows a decisive move in one direction — buyers or sellers dominated the entire period with little opposition. A candle with a tiny body and long wicks shows indecision — price moved a lot in both directions but ended close to where it opened. A candle with a long lower wick and small body (called a pin bar or hammer) shows that sellers pushed the price down sharply but buyers overwhelmed them and pushed the price back up — a bullish rejection.
Common Candle Patterns to Know
Some of the most reliable candle patterns: Doji — open and close almost identical, showing indecision, especially significant after a long trend. Hammer/Pin Bar — long lower wick, small body near the top, bullish reversal signal at support. Shooting Star — long upper wick, small body near the bottom, bearish reversal signal at resistance. Engulfing — a candle whose body completely covers the previous candle's body, bullish (green engulfs red at support) or bearish (red engulfs green at resistance). Inside Bar — candle completely contained within the previous candle's range, indicating a pause and potential breakout setup.
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