How to Read Candlestick Charts
A candlestick chart shows you how price moved over a set period using small rectangles called candles. Each candle records four prices for that period: the open, the high, the low, and the close (together called OHLC). Once you can read one candle, you can read a whole chart, because the same shape repeats over and over.
What a candlestick is
A candlestick is a single bar on the chart that sums up one slice of time. If you are looking at a 1-hour chart, each candle covers one hour. If you are looking at a daily chart, each candle covers one full day in UTC.
Every candle has two parts. The thick middle part is the body, and the thin lines poking out of the top and bottom are the wicks (also called shadows or tails). The body shows where price opened and closed. The wicks show the highest and lowest points price reached before the candle finished.
That is the whole trick. A candle is just a tidy way of drawing four numbers, the open, high, low and close, so you can see them at a glance instead of reading a table.
OHLC, and bullish vs bearish
OHLC stands for Open, High, Low, Close. The open is the price at the start of the period, the close is the price at the end, and the high and low are the most extreme prices reached in between.
Colour tells you the direction. A bullish candle means price closed higher than it opened, so the close sits at the top of the body. A bearish candle means price closed lower than it opened, so the close sits at the bottom. Most charts colour bullish candles green and bearish candles red, but you can set any colours you like, so always read the body, not just the colour.
For example, on EUR/USD a candle might open at 1.0850 and close at 1.0880. That is a bullish candle with a 30 pip body (a pip is the fourth decimal place on most pairs, so 0.0030 is 30 pips). If that same candle had a long upper wick reaching 1.0905, it means price pushed up to 1.0905 during the period but got pushed back down before the close.
How to read a single candle, then a pattern
Read one candle in four quick steps. First, find the body to see if it is bullish or bearish. Second, see how big the body is, since a long body means strong, one-directional movement and a tiny body means buyers and sellers roughly cancelled out. Third, look at the wicks, because a long wick shows price was rejected from that level. Fourth, compare it to the candle before it.
That fourth step is where patterns come from. A pattern is just two or three candles read together. A candle with a tiny body and long wicks on both sides is often called a doji, and it signals indecision. An engulfing pattern is when one candle's body completely covers the previous candle's body in the opposite direction, which shows momentum may be shifting.
Patterns are clues, not guarantees. A bullish engulfing candle does not mean price must go up next. It means buyers were more active in that one period, and it is one piece of evidence you weigh alongside everything else on the chart.
Common mistakes beginners make
The biggest mistake is treating colour as a signal on its own. One green candle does not mean buy, and one red candle does not mean sell. A single candle is a tiny snapshot, and zooming out to see the surrounding candles usually changes the story completely.
The second mistake is ignoring the timeframe. A candle on a 5-minute chart and a candle on a daily chart look identical but mean very different things. Always know what period each candle represents before you read anything into it.
The third is forcing patterns where none exist. Once you learn the names, it is tempting to spot a doji or an engulfing candle everywhere. Be honest with yourself. If you have to squint to see it, it probably is not there. Reading charts is a skill that takes screen time, and it is worth remembering that trading is risky and most retail traders lose money, so learning to read price calmly matters more than chasing every shape.
Common questions
What do the colours on a candlestick chart mean?
Colour shows direction. A bullish candle (usually green) closed higher than it opened, and a bearish candle (usually red) closed lower than it opened. The colours are just defaults you can change, so always confirm by looking at where the body opened and closed.
What is the difference between the body and the wick?
The body is the thick part of the candle and shows the distance between the open and close prices. The wicks are the thin lines above and below the body, and they show the highest and lowest prices reached during that period before it closed.
What does OHLC mean?
OHLC stands for Open, High, Low, and Close, the four prices every candle records for its time period. The open and close form the body, and the high and low form the tips of the wicks.
Are candlestick patterns reliable?
Patterns are clues about what buyers and sellers were doing, not predictions. A pattern like an engulfing candle or a doji can hint that momentum is shifting, but it is only one piece of evidence and price can still do the opposite, so never trade on a single candle alone.
Reading about it is step one.
The free first five modules put this on a real chart and make you do the work, not just read about it. No card required.