Lesson 1: How Candlesticks Work

🕯️ Candlestick Patterns in 5 Minutes · Lesson 1 of 10

Before you can read any pattern, you have to read one candle. That's the whole game. A candlestick chart is just hundreds of these little shapes lined up in a row, and once you know how a single one is built, the patterns in the rest of this course will click fast.

So let's slow down and look at exactly one candle.

Four prices, one shape

Every candlestick covers a set chunk of time. On a daily chart, each candle is one trading day. On a 5-minute chart, each candle is five minutes. Whatever the timeframe, that one candle records four prices from that period.

That's it. Four numbers. People sometimes call this OHLC, which is just those four words shortened. A line chart only shows you the close. A candle shows you all four, which is why traders prefer them.

The body and the wicks

The fat part in the middle is the body. It stretches between the open and the close. The thin lines poking out the top and bottom are the wicks, also called shadows. They reach up to the high and down to the low.

Here's the thing to lock in. The body shows you where price opened and closed. The wicks show you how far price stretched before it got pulled back. A candle with a tall body and tiny wicks means price moved in one direction and stuck there. A candle with a small body and long wicks means price whipped around and ended up near where it started.

Green means up, red means down

Color tells you the direction at a glance. A green candle (some platforms use white or hollow) means the close was higher than the open. Buyers won that period. A red candle (or black, or filled) means the close was lower than the open. Sellers won.

Quick example. A stock opens at $50 and closes at $54. That's a green body running from $50 up to $54. If it had instead opened at $50 and closed at $47, that's a red body running from $50 down to $47. Same opening price, opposite outcome, opposite color.

What one candle actually tells you

Read together, the body and wicks tell a small story about a fight between buyers and sellers.

A long green body with short wicks says buyers were in control start to finish. A long red body says sellers ran the show. A long lower wick means buyers stepped in and pushed price back up after it dropped. A long upper wick means sellers slapped price down after it ran up. A tiny body says neither side got the upper hand.

One candle on its own is a single data point. It won't tell you what happens next. But it tells you who had momentum during that exact slice of time, and that's the raw material every pattern is built from.

If you want to see how candles string together into the bigger picture, our guide on how to read stock charts walks through full charts, and the candlestick patterns overview previews where this course is headed.

Next up

Now that you can read one candle, Lesson 2 covers single-candle signals. We'll look at the doji, the marubozu, and the spinning top, three shapes that each tell you something specific about the tug of war between buyers and sellers in a single bar.