Most charts you will use show candlesticks. Each candle summarises one period of time, such as five minutes or one day, using four prices: the open, the high, the low and the close.
The parts of a candle
- The body is the thick part between the open and the close.
- The wicks (or shadows) are the thin lines showing how far price travelled above and below the body.
- On most charts a bullish candle closed higher than it opened, and a bearish candle closed lower. Charts often colour them differently; the diagram above uses a light outline for bullish and a filled dark body for bearish.
What a candle tells you
A long body means one side was in control for most of the period. A long wick means price went somewhere and was pushed back. A tiny body with long wicks means a lot of movement and no agreement.
What a candle does not tell you
One candle does not predict the next. Names such as hammer, doji or engulfing describe a shape, and shapes only matter in context: where price is, which direction it has been moving, and what timeframe you are on. Treat candle patterns as a way of describing what happened, not as signals on their own.
Timeframes
The same market looks different on different timeframes. A one-minute candle and a one-day candle on the same chart tell different stories. Higher timeframes show the bigger picture with less noise; lower timeframes show more detail and more randomness. You will learn to use them together in the Market Structure lessons.