How to Read Candlestick Charts: The Complete Guide

Open any trading platform and you are met by rows of small red and green bars. They look like code at first, but each one is a short, readable story about a period of trading. Learning how to read candlestick charts is the first real chart skill, and it takes less time than you might expect.

Quick answer: To read candlestick charts, look at each candle’s four prices: open, high, low and close. The body spans the open and close and shows who won the period; green (bullish) closed higher, red (bearish) closed lower. The wicks mark the high and low, showing prices that were tried and rejected. Always read candles in context.

Candlestick chart explained: what each candle records

Every price chart divides time into equal slices. On an hourly chart each slice is one hour; on a daily chart it is one trading day. That slice is called the timeframe, and every candlestick on the chart summarises exactly one of them.

For each period, the chart records four prices:

Open: the first price traded in the period.
High: the highest price reached.
Low: the lowest price reached.
Close: the last price of the period.

Traders call these four numbers OHLC, and every chart type is just a different way of drawing them. Candlestick charts are usually traced back to Japanese rice traders in the 1700s, and they spread to Western trading screens from the early 1990s. They won because your eye reads their shape faster than a table of numbers.

Terraced fields of ripe golden rice in a Japanese valley, with green mountains and a few houses in the distance under a blue sky. — Ripe rice in the Aso area of Japan. Candlestick charts are usually traced back to Japanese rice traders, who recorded each period's prices long before computer screens.

You can see the difference below. The same 30 periods of EUR/USD are drawn as a line, as OHLC bars and as candlesticks.

A candlestick shows the same four prices with a filled body between open and close. Direction and strength are visible instantly. This is what most traders use.

The same 30 periods of EUR/USD drawn as a line chart, as OHLC bars and as candlesticks. Only the candlestick view shows direction and strength at a glance.

A line chart joins the closing prices only. It shows the broad direction but hides that a quiet-looking hour may have swung 40 pips each way. OHLC bars keep all four prices, but the open and close are tiny side ticks that are slow to read. Candlesticks keep all four and colour the space between the open and close, so the winner of each period jumps out. The Academy lesson on chart types compares the three in more depth.

How to read candlestick charts: the anatomy of one candle

A candle has two parts. The thick rectangle is the body, and it runs from the open price to the close price. The thin lines above and below are the wicks, also called shadows. The upper wick reaches up to the high of the period and the lower wick reaches down to the low. Tap each part of the candle below to see what it represents.

The body is the range between the open and the close. A long body means one side was firmly in control for the whole period.

Tap a part of the candle to see what it shows. Switch between bullish and bearish and watch the open and close swap places at the ends of the body.

The colour tells you which end of the body is which. On a bullish candle, the close is above the open, so the open is at the bottom of the body and the close at the top. On a bearish candle, the close is below the open, so it is the other way round. The high and low never change position: they are always the tips of the wicks.

Here is the same set of prices drawn both ways. Both candles reached the same high and the same low. The only difference is the order in which the open and close happened.

The same high and low drawn as a bullish and a bearish candle. On the bullish candle the open is at the bottom of the body; on the bearish candle it is at the top. The close tells you who won the period.

Colour schemes vary: most platforms use green and red, some use hollow and filled bodies, and you can change them in any platform. So rely on the rule, not the colour: the close is the end of the body where price finished.

It also helps to measure candles in pips rather than eyeballing them. In the figure, each body is 40 pips (1.0860 minus 1.0820) and each range is 80 pips. Numbers stop the zoom level of your chart from making a small candle look enormous. Our guide to what a pip is in forex explains how to count them on any pair.

Of the four prices, the close matters most. The high and low show what was attempted; the close shows where the market agreed to leave it. When traders say a level held or broke, they usually mean on a closing basis.

Bullish and bearish candles: what the body and wicks tell you

Once you can label a candle, the next step is reading what its shape says about the contest between buyers and sellers. Two green candles can mean very different things; three features carry the information.

Body size shows conviction

A long body means one side moved price a long way between the open and the close and held it there. A long bullish body says buyers were in control for most of the period. A long bearish body says the same about sellers. A small body means the period ended close to where it started: whatever happened in between, neither side made lasting progress.

Body size is relative. A 20-pip body is large on a 15-minute EUR/USD chart and tiny on a daily GBP/JPY chart, so compare each candle with its neighbours. A body two or three times their size is worth noticing.

Candlestick wicks show rejection

Candlestick wicks are where the most useful clues hide. A wick is a price that was reached and then abandoned before the close. A long upper wick means buyers pushed price up during the period, but sellers pushed it back down before it ended. Higher prices were tried and rejected. A long lower wick means the opposite: sellers drove price down and buyers took it back. Lower prices were tried and rejected.

Short wicks, or none at all, mean price spent the period moving in one direction and closed near its extreme. Long wicks on both sides mean the market swung back and forth and nobody held their gains.

Where the body sits in the range

For every candle you study, check where it closed within its range. A close in the top quarter of the range means buyers finished in charge, whatever the colour. A close in the bottom quarter means sellers did. A close in the middle means a draw.

The four candles below all have exactly the same high and low. Only the open and close move, and each one tells a different story.

Four candles with the same 80-pip range from 1.0800 to 1.0880. Where the body sits inside the range, not the range itself, tells you who won and what was rejected.

Notice the third candle. It is red, but it only closed 10 pips below its open. The meaningful part is the 66-pip upper wick: buyers took price almost to 1.0880 and could not keep it there. The second candle is green, but its story is about the long lower wick, not about the 10 pips it gained. Reading bullish and bearish candles well means reading the whole shape, not the colour.

Doji, hammer, shooting star and other shapes worth knowing

Some candle shapes appear so often that they have names. Treat each name as a description of what happened, not a forecast of what happens next. These five are the most worth learning.

Five common single-candle shapes. A doji and a spinning top show indecision, a hammer rejects lower prices, a shooting star rejects higher prices, and a marubozu shows one side in control from open to close.

Doji. The open and close are equal or nearly equal, so the body is a thin line. Price moved but ended where it began: neither side won. After a long trend, that pause can be the first sign the dominant side is tiring. In a quiet range it means very little.

Hammer. A small body near the top of the range and a long lower wick, with little or no upper wick. A common rule of thumb is that the lower wick should be at least twice the length of the body. Sellers pushed price well down, then buyers took it all back. The colour of the body matters less than the wick. A hammer is most interesting after a fall, at a level where buyers have appeared before. The same shape after a strong rise is often called a hanging man, and it is read as a warning rather than a sign of strength.

Shooting star. The mirror image of a hammer: a small body near the bottom of the range and a long upper wick. Buyers drove price up and sellers sent it back down. It is most interesting after a rise, at a level where sellers have appeared before. The same shape after a fall is called an inverted hammer.

Marubozu. A long body with no wicks, or almost none. Price opened at one extreme and closed at the other, so one side controlled the whole period. It often appears at the start of a strong move or when price breaks through a level.

Spinning top. A small body in the middle of the range, with wicks on both sides. It is a gentler doji: both sides tried, neither held, and its meaning depends on what came before.

The best way to understand these shapes is to make them yourself. Move the sliders below and watch the name change as the body shrinks and the wicks grow.

OpenCloseUpper wick lengthLower wick length

Set the open, close, high and low with the sliders. The candle redraws and the shape is named. Try turning a marubozu into a doji, then a hammer into a shooting star.

You will notice that the name changes most when the ratio of body to wicks changes. That ratio is what you are really reading. The hub lesson on candlestick anatomy has a short quiz to check you can tell a doji, a hammer and a shooting star apart.

Two-candle patterns: bullish and bearish engulfing

Single candles describe one period. Pairs of candles start to describe a change. The most widely used two-candle pattern is the engulfing pattern, and it builds directly on everything above.

A bullish engulfing pattern appears after a fall. A small bearish candle is followed by a larger bullish candle whose body completely covers the body of the first. In one period, buyers wiped out the whole of the previous period’s selling and then some. A bearish engulfing pattern is the opposite: after a rise, a small bullish candle is followed by a larger bearish candle whose body covers it.

Bullish and bearish engulfing patterns. In each case the second candle's body completely covers the first candle's body, showing a sharp shift in control after a run in the other direction.

One detail is specific to forex. In share markets, where trading stops overnight, the second candle often opens with a gap beyond the first candle’s close, and textbook definitions of engulfing patterns assume that. Forex trades almost continuously from Monday to Friday, so each candle usually opens at or very near the previous close. In practice, forex traders tend to require only that the second body is larger than the first and closes beyond its open.

A bullish engulfing pattern after a long fall into tested support is a meaningful shift; the same pattern mid-range is just one busy period after another. Three-candle patterns such as the morning star use the same logic, and larger shapes, from double tops to triangles, are covered in the lesson on chart patterns.

Candlestick timeframes: same market, different candles

Every candle covers one timeframe, and you choose which. Common ones are M1, M5 and M15 (one, five and fifteen minutes), H1 and H4 (one and four hours), D1 (one day) and W1 (one week). Switching timeframe does not change the market. It only changes how the same prices are grouped.

The same 24 hours as 24 one-hour candles. Each one contains four M15 candles.

The same 24 hours of EUR/USD drawn as 15-minute, one-hour and four-hour candles. Tap a timeframe: the prices never change, only how they are grouped.

Candlestick timeframes nest exactly. Four 15-minute candles make one hourly candle: its open is the first 15-minute open, its close the last 15-minute close, and its high and low the extremes of all four. So a clean hammer on the four-hour chart may be a messy fall and recovery on the 15-minute chart, and a daily doji may hide a 60-pip rally and a 60-pip fall. Neither view is wrong.

Which timeframe should you read? As a rule, higher timeframes are more reliable. A daily candle reflects a full day of trading by the whole market; a five-minute candle can be shaped by one large order or a few seconds of news. The trade-off is that higher-timeframe candles form slowly, so you get fewer signals and need wider stop losses.

Many traders use two or three timeframes together: a higher one to see the trend and the main levels, and a lower one to time entries. The lessons on timeframes and multi-timeframe analysis explain how to choose a combination that fits the time you have.

One more forex detail: the daily candle has to close somewhere, even though the market trades around the clock. Many platforms close the forex day at 5pm New York time, but some use a different server time, which can add a small Sunday candle and change the shape of every daily candle. If your daily candles differ from someone else’s, this is usually why. Our guide to forex market hours explains how the trading day is divided into sessions.

A small bird perched on the edge of an old, lichen-covered stone sundial, with green hills out of focus behind. — A sundial splits the day into equal parts by the sun's position. A candle sums up one fixed slice of time in the same way, and the timeframe you choose sets how long that slice is.

Reading a candle in context

Everything so far has been about reading one or two candles on their own. That is the vocabulary. Using it well means reading candles the way you read words: in a sentence. Before you act on any candle, ask three questions.

What is the trend? Is price making higher highs and higher lows, lower highs and lower lows, or neither? A bullish signal in a downtrend is a counter-trend idea and needs more evidence than one in an uptrend.
Where is the candle? Is it at a support or resistance level where price has turned before, or in the middle of nowhere? Candles at levels are worth reading; candles between levels are mostly noise.
Has it been confirmed? Did the next candle follow through in the direction the signal suggests? A hammer followed by a strong bearish candle is a failed hammer.

When the answers line up, you have confluence: several independent reasons pointing to the same idea. Step through the chart below to see a single candle read in context.

A hammer read in context on EUR/USD: a downtrend, a tested support level, a rejected break below it and a confirming close. Step through to see each piece of evidence added in turn.

The candle did not predict the rise that followed. It marked a precise point where the market rejected lower prices at a level that mattered, and gave you an obvious place for a stop loss: just beyond the wick, where the idea is proven wrong. That is the most practical use of candlestick reading. Our guide to support and resistance in forex shows how to find the levels in the first place, and our guide on where to place a stop loss explains why the far side of a rejection wick is such a natural spot.

Example: reading and using a hammer on GBP/USD

You have a $5,000 account. GBP/USD has fallen from about 1.2850 to an area near 1.2700 where it turned higher twice last month. You mark 1.2700 as support.
A four-hour candle prints: open 1.2712, high 1.2718, low 1.2672, close 1.2714. The body is 2 pips, the upper wick 4 pips and the lower wick 40 pips, out of a 46-pip range. The lower wick is twenty times the body, and the close sits in the top tenth of the range. It is a hammer, and its wick dipped below support and was rejected.
You wait. The next four-hour candle closes at 1.2725, above the hammer’s high of 1.2718. That is your confirmation, and you buy at 1.2725.
The stop goes a few pips below the hammer’s low, at 1.2665. The risk is 1.2725 − 1.2665 = 60 pips.
You risk 1% of the account: $50. A pip on one standard lot of GBP/USD is worth $10, so the size is $50 ÷ (60 × $10) = 0.083 lots, rounded down to 0.08 lots ($0.80 per pip). If the stop is hit, the loss is 60 × $0.80 = $48.
The target is the earlier swing high, a resistance level at 1.2850: 125 pips away, worth 125 × $0.80 = $100. That is a reward-to-risk ratio of about 2.1 to 1. The candle gave you the entry trigger and the stop; the chart gave you the target.

The stop and the position size were decided before the order, from the shape of the candle and the account balance, not from how convinced you felt. The Academy lesson on stop-loss placement covers this step in more detail, and support and resistance shows how to draw the levels as zones rather than single lines.

Common mistakes when reading candlestick charts

Reading the colour and ignoring the shape

A red candle with a long lower wick that closed near its high is closer to a bullish signal than a bearish one. Colour tells you only whether the close was above or below the open. Read the body size, the wicks and where the close sits in the range before you form any opinion.

Trading patterns in the middle of nowhere

Hammers, dojis and engulfing patterns appear dozens of times a day on every pair. Most of them sit between levels and mean nothing. Only read a pattern as meaningful when it forms at a level you had already marked before the candle appeared.

Acting before the candle closes

A candle is not finished until its period ends. A beautiful hammer with ten minutes to go on the hourly chart can turn into a long bearish candle by the close. Wait for the close, and ideally for the next candle to confirm, before you act.

Treating a pattern as a prediction

No candle shape tells you what will happen next. Even good setups fail regularly, which is why every trade needs a stop loss and a position size that keeps the loss small. Keeping a trading journal with a screenshot of each setup is the quickest way to learn which candles actually work for you, and our guide to trading psychology explains why the urge to see patterns everywhere is so strong.

Switching timeframes until something agrees

If the hourly chart shows nothing, it is tempting to check the 15-minute chart, then the five-minute chart, until a pattern appears. That is finding a reason to trade, not reading the market. Choose your timeframes in advance and stick to them. Before you risk money on any of this, practise on a demo account, and only trade live with a broker authorised by a serious regulator such as the UK’s Financial Conduct Authority.

Frequently asked questions

How do you read candlestick charts for beginners?

Start with one candle at a time. Find the open and close at the ends of the body, and the high and low at the tips of the wicks. The colour shows whether the close was above or below the open. Then ask where the close sits in the range and how long the wicks are. Finally, check the trend and nearby support or resistance.

What do green and red candles mean?

On most platforms a green candle is bullish, meaning the period closed higher than it opened, and a red candle is bearish, meaning it closed lower. Colours are only a convention and can be changed in your platform settings. The colour tells you direction for that one period, not whether the trend is up or down.

What do long wicks on a candle mean?

A long wick shows prices that were reached during the period and then rejected before the close. A long upper wick means buyers pushed price up and sellers pushed it back down. A long lower wick means sellers pushed it down and buyers brought it back. Long wicks at support or resistance levels are especially worth noticing.

What is the difference between a hammer and a shooting star?

They are mirror images. A hammer has a small body near the top of the range and a long lower wick, showing that lower prices were rejected. A shooting star has a small body near the bottom and a long upper wick, showing that higher prices were rejected. A hammer matters most after a fall, a shooting star after a rise.

Which timeframe is best for reading candlestick charts?

There is no single best timeframe. Higher timeframes such as the four-hour and daily charts give more reliable candles and need less screen time, but signals are less frequent and stops wider. Lower timeframes give more signals with more noise. Many traders read the trend on a higher timeframe and time entries on a lower one.

Are candlestick patterns reliable?

Not on their own. A candlestick pattern describes what happened in one or two periods, and the same shape can mean very different things in different places. Patterns become more useful when they form at a tested level, in line with the trend, and are confirmed by the next candle. Even then they fail often, so always use a stop loss.