Free Trading School · Level 4: Reading Charts
Anatomy of a candlestick
Each candle shows four prices for its period: the open, the high, the low and the close (often written OHLC). The thick part, the body, spans from the open to the close. The thin lines, the wicks or shadows, show the highest and lowest prices reached.
A bullish (green) candle closed above its open; a bearish (red) candle closed below its open.
Three shapes worth knowing
- Doji: open and close are almost equal. Buyers and sellers are in balance, a sign of indecision.
- Hammer: small body near the top and a long lower wick. Sellers pushed price down but buyers rejected the low strongly.
- Engulfing: a candle whose body completely covers the previous one, in the opposite colour. It shows a sudden shift in control.
A single candle is a clue, not a signal. Candles matter most when they appear at important levels, which is where support and resistance come in.
The close is the most important price of a candle: it shows where the battle for that period ended.
Quick answers
Each candle shows four prices for its period: the open, the high, the low and the close (often written OHLC). The thick part, the body, spans from the open to the close. The thin lines, the wicks or shadows, show the highest and lowest prices reached.
The close is the most important price of a candle: it shows where the battle for that period ended.
The close is below the open. Bearish means price closed lower than it opened.
Next lesson: Timeframes