Reading a candlestick

What it is

Each candle shows one period (a minute, an hour, a day) with four prices: where it opened, the highest and lowest it traded, and where it closed (OHLC).

The body runs from the open to the close. It's green (bullish) when price closed higher than it opened, red (bearish) when it closed lower. The thin wicks above and below show the high and low that price reached but didn't hold.

How to spot it

• A big body with small wicks means one side was in control for the whole period.
• Long wicks mean price was pushed somewhere and rejected: a long lower wick shows buyers stepping in, a long upper wick shows sellers.
• A tiny body with wicks on both sides means neither side won (indecision).

How to use it

• Read candles in context: the same candle means much more at a key level than in the middle of nowhere.
• Look at the closes, not just the wicks, when deciding if a level has really broken.
• Check a higher timeframe's candle to see the bigger picture of what the small ones are building.

Common mistakes

• Reading a single candle with no regard for trend or location.
• Acting on a candle before it has closed; it can look completely different by the close.

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