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How to Read Candlestick Charts, and What a Pattern Cannot Tell You

Each candlestick shows a period's open, high, low and close. How to read bodies and wicks, what common patterns are said to mean, and why none of them predicts.

By Published 3 min read

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AI-assisted article. Drafted with AI tools from the sources cited below and checked by automated tests and an AI editorial review. No person has reviewed it yet. How we write and check articles.

Key takeaways

  • Each candlestick summarises one period with four prices: open, high, low and close.
  • The body spans the open and close; the thin lines above and below, the shadows or wicks, reach to the high and low.
  • A hollow or green candle closed above its open; a filled or red candle closed below it.
  • Named patterns such as the doji and hammer describe the shape of one or a few candles and are interpreted in context.
  • Candlesticks describe what happened; they do not forecast what will happen, and even ChartSchool says patterns need further confirmation.

To a beginner, a candlestick chart can look like a barcode. Each candle is actually a compact summary of one period's trading, and once you can read one, you can read them all. StockCharts' ChartSchool, a reference on charting, traces the method to Japanese rice traders and explains each part of the candle; this guide follows its definitions.

The four prices in every candle

ChartSchool explains that a candlestick chart needs four values for each period: open, high, low and close.

  • The body (or real body) is the thick part, spanning the open and the close.
  • The shadows (also called wicks or tails) are the thin lines above and below. The top of the upper shadow marks the period's high; the bottom of the lower shadow marks the low.

A candle's period can be anything: a minute, an hour, a day, a week. A daily chart has one candle per trading day.

Up candles and down candles

Candle Close vs open Usual colour How it is drawn
Up Close above open Hollow (white) Body bottom = open, body top = close
Down Close below open Filled (black) Body top = open, body bottom = close

Some apps use green and red instead of hollow and filled, but the logic does not change. ChartSchool describes hollow candles, where the close is above the open, as indicating buying pressure, and filled candles as indicating selling pressure.

Reading the shape

ChartSchool's guidelines for interpreting a single candle:

  • Long bodies show strong buying or selling pressure: the price moved a long way from open to close.
  • Short bodies show little movement, often consolidation.
  • Long shadows show that the price travelled well beyond where it opened and closed during the period. A long upper shadow means it traded much higher before falling back; a long lower shadow means it traded much lower before recovering.
  • No shadows (a Marubozu) means the period opened at one extreme and closed at the other.

Example. A daily candle with open $50, high $54, low $49.50 and close $50.20 has a small body near the bottom of a long upper shadow. Buyers pushed the price $4 above the open, but by the close it had given almost all of that back.

A few named patterns

Chart readers give names to recurring shapes. A few that ChartSchool describes:

Pattern Shape Usual reading
Doji Open and close (nearly) equal; tiny body Indecision: neither side moved the price by the close
Hammer Small body near the top, long lower shadow, after a decline Sellers pushed prices down, buyers pushed them back
Shooting star Small body near the bottom, long upper shadow, after a rise Buyers pushed prices up, sellers pushed them back
Engulfing A body that completely covers the previous candle's body A shift in which side controlled the period

Notice the "after a decline" and "after a rise" in the table. ChartSchool stresses repeatedly that a candle's meaning depends on its position within the broader picture: a long white candle after a long decline means something different from one after a long advance.

What candlesticks cannot do

A candlestick is a record. It tells you exactly what happened in a period and nothing certain about what will happen next. Even ChartSchool says a doji on its own is not enough to mark a reversal and that hammers require further confirmation. The listing for our own simulator, Learn to Trade Stocks Beginner, says it directly: technical indicators summarise price or volume information but cannot confirm a future outcome or remove uncertainty. Chart analysis is one approach among several; technical versus fundamental analysis compares it with the study of a company's business.

Practising chart reading safely

Three habits make chart practice more useful:

  1. Describe before you interpret. Say what the candle shows (open, close, range) before deciding what it means.
  2. Look at context: the trend before it, trading volume on the day, and nearby price levels; see support and resistance.
  3. Record and check. Write down what you expect and see how often you are right.

Learn to Trade Stocks Beginner includes candlestick lessons and a chart replay mode with play, step and speed controls, so you can step through simulated price action one candle at a time with a virtual balance; the guide to the app explains how. It is one of our education apps, and the investing basics hub continues with moving averages.

Good to know

Frequently asked questions

How do you read a candlestick?
Each candle covers one period, such as a day. The body runs from the opening price to the closing price, and the shadows above and below show the highest and lowest prices traded. If the close is above the open, the candle is usually hollow or green; if below, filled or red.
What does a long upper wick mean?
That prices traded well above where they closed during the period: buyers pushed the price up, but it fell back before the close. ChartSchool describes this as buyers dominating during the session before sellers forced prices down from their highs, and stresses that the meaning depends on what came before.
What is a doji?
A candle whose open and close are equal or almost equal, so it has little or no body. It shows that by the end of the period neither buyers nor sellers had moved the price from where it started.
Do candlestick patterns predict prices?
No pattern can guarantee what happens next. Patterns summarise past trading, and ChartSchool itself says patterns such as the doji and hammer need further confirmation. The listing for the app this site publishes puts it plainly: technical indicators cannot confirm a future outcome.

Sources

  1. Introduction to Candlesticks (ChartSchool) (opens in a new tab)StockCharts.com — accessed
  2. Learn to Trade Stocks Beginner (store listing) (opens in a new tab)Google Play — accessed

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