Candlestick Anatomy, Learning to Read the Language of Price

[Fairman]

Candlestick Anatomy, Learning to Read the Language of Price

Candlesticks are the standard way to display price on most charts. Each candle tells a small story about what happened in a specific time period.

The parts of a candle:

- Open: the price at the start of the period
- Close: the price at the end
- High: the highest price reached
- Low: the lowest price reached
- Body: the thick part between open and close
- Wicks (shadows): thin lines showing the high and low beyond the body

Colors:

- A bullish candle closes higher than it opened (often green or white)
- A bearish candle closes lower than it opened (often red or black)

What to read from a candle:

1. Large body: strong momentum in that direction
2. Small body: indecision or low momentum
3. Long upper wick: buyers pushed higher but sellers rejected the move
4. Long lower wick: sellers pushed lower but buyers rejected the move
5. Close near the high or low: one side dominated

Practice exercise:

1. Open a chart and pick ten recent candles.
2. For each, write a one-sentence story: "Buyers pushed up, then sellers took over and closed near the low."
3. Compare your stories with what happened next.

Don't memorize dozens of named patterns yet. Start by understanding what each candle shows about the battle between buyers and sellers.

Once you read candles naturally, other tools become much easier.

[Fairman]

Worked example of reading one candle. On the 1 hour chart, a candle opens at 1.0850, drops to 1.0820, then closes at 1.0848. Long lower wick, small body near the top. That tells you sellers pushed during the hour but buyers took most of it back. On its own it's a clue, not a signal. What gives it meaning is where it happens. The same candle halfway between two levels tells you very little. At the previous day's low, after price swept below it, it says more. A useful exercise is to switch to the 5 minute chart for that same hour and see how the wick was actually formed. It makes candles much easier to understand.

[Fairman]

Beginners often judge a candle before it closes. The 1 hour candle can look like a strong rejection at minute 40 and close as a full bearish body by minute 60. Wait for the close before reading the story. Also remember that candle times depend on the broker's server time. A broker on GMT plus 2 or plus 3 shows different 4 hour and daily candles from TradingView set to Lagos time. The 4 hour candles might close at different hours, so a pattern on one chart can look quite different on the other. Set your charting platform to match the broker before comparing.