Orders & execution · Beginner

Reading Candlestick Charts

A candle encodes four numbers. Everything else people do with candlesticks is interpretation layered on top, and it is worth keeping the two apart.

Last reviewed 15 September 2026 by the MarketPro research desk · Editorial policy

In short

A candlestick shows four prices for one period: the open and close as the thick body, and the high and low as the thin wicks above and below. Colour indicates whether the close was above or below the open. A candle with a 22-pip body and a 13-pip upper wick tells you price reached higher and was pushed back, which a line chart drawn on closes would discard entirely.

What to remember

The body is open to close, the wicks are high and low. Four numbers, and everything else is interpretation.
A long upper wick records that price traded there and came back. It does not record who sold, or whether they have finished.
Wick extremes are where stop orders cluster, which is part of why price keeps returning to them.
Rising candle ranges mean a stop at last week's distance is now inside the noise, so the position built on it is sized wrong.

Lesson 7 of 16 in Orders and execution

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Four numbers inside one shape

A candlestick encodes four prices for a fixed period: the open, the high, the low and the close. The thick body spans open to close. The thin wicks above and below reach to the high and the low. Colour tells you which end of the body is the close, so a candle that closed above its open is one colour and a candle that closed below it is the other.

That is the whole notation. Everything else people do with candlesticks is interpretation layered on top of those four numbers, and it is worth keeping the two separate in your head.

Reading an hourly candle from 148.20 to 148.42

Take a single USD/JPY hourly candle with an open of 148.20, a high of 148.55, a low of 148.16 and a close of 148.42. On a yen pair a pip is the second decimal, so read it back like this:

Body, 22 pips. The hour finished 22 pips above where it started, so buyers ended the period in front.
Upper wick, 13 pips. Price reached 148.55 and did not hold it. Something sold into that level and gave back more than half of the body's worth of gains.
Lower wick, 4 pips. Almost nothing traded below the open, so there was little early selling pressure.
Total range, 39 pips. Price travelled 39 pips to achieve a net 22, so roughly 44% of the hour's movement was retraced within it.

That last figure is the part a line chart throws away entirely. A line chart drawn on closes would show a 22-pip step and nothing else. The candle tells you the hour was contested, that 148.55 met supply, and that a stop placed a couple of pips above the high would have survived the period by a margin you can measure. On a 0.5 lot position each of those pips is worth about $3.40 with USD/JPY near 148, not the $5 the same half lot pays on a dollar-quoted pair, which the pip calculator will confirm for any pair and size.

What the wick records

Wicks are the most useful and the most over-interpreted part of the chart. What a long upper wick literally records is that price traded up there and then came back within the period. That is a fact about order flow: buyers were willing to pay that level, and enough selling appeared to push price away from it before the period closed.

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What it does not record is who was doing the selling, why, or whether they are finished. The same 40-pip upper wick means one thing in a quiet Asian hour in the middle of a range and something else entirely at a prior daily high with volume behind it. They are drawn identically. The candle's shape is data. The story is yours, and it can be wrong.

One practical consequence: wick extremes are where stop orders cluster, because they are the obvious place to put a stop. That is also why price returns to them. A level that produced a long wick is a level where a lot of resting orders now sit just beyond it.

Candles describe, they do not forecast

Named patterns, the hammers and engulfings and dojis, are shorthand for common shapes. They are worth learning as vocabulary. They are not worth trading in isolation, for a reason that is easy to verify yourself: the same shape appears hundreds of times across a year of any chart, in trends, in ranges, at levels and in the middle of nowhere, and the outcomes differ completely by context.

Two rules keep candlestick reading honest:

The period boundary is arbitrary. A four-hour candle from 08:00 and one from 09:00 cover different hours and can show opposite shapes on identical price action.
The pattern is not the reason. If the only thing supporting a trade is the shape of one candle, you have a reason that fails as often as it works.

Reading the sequence instead of the single bar

The information density goes up sharply when you read several candles as a series. Three questions extract most of it, and none of them requires a named pattern.

Are the bodies growing or shrinking? Expanding bodies in one direction say participation is increasing. Shrinking bodies say the move is running out of people willing to chase it.
Which side has the wicks? A run of candles with long lower wicks and small upper ones says dips are being bought within each period, whatever the closes do.
Are ranges expanding? Rising candle ranges mean volatility is rising, which changes where a sensible stop goes and therefore what position size the trade supports.

That third question is the one with money attached. If the average candle range on your timeframe has doubled, a stop placed at last week's distance is now inside ordinary noise, and the position built on it is sized wrong. Combining candles with trend context and volume, rather than reading any single bar as a signal, is the difference between a chart that describes the market and a chart you imagine is talking to you. Our guide on how prices move covers the order flow underneath the shapes.

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Written and reviewed by the MarketPro research desk

MarketPro is a trading-signal and trading-education app operated by Harajuku Holdings LTD (Cyprus). Our signal desk publishes and tracks every trade idea in-app, and every page here is checked against the app's live behaviour before publishing. Last reviewed 15 September 2026. How we produce signals and content · About MarketPro

FAQ

Reading Candlestick Charts: questions

What does a long wick on a candlestick mean?

Literally, that price traded to that extreme during the period and returned before the period closed. A long upper wick means buyers paid up there and enough selling arrived to push price back down. It is a record of order flow within the period, not a prediction, and the same shape means very different things at a major level than in the middle of a quiet range.

Are candlestick patterns reliable?

Not on their own. Any named pattern appears hundreds of times a year on any chart, in trends, in ranges and in nothing in particular, and the outcomes differ entirely by context. Treat the patterns as vocabulary for describing what happened rather than as signals. If the shape of one candle is the only support for a trade, the reason is thin.

Why do candlestick charts beat line charts?

A line chart plots one price per period, usually the close, so it discards the range entirely. A candle preserves the open, high and low as well, which tells you how far price travelled to achieve the net move and where it was rejected. That matters directly for stop placement, because the stop has to sit outside the range the market actually covers.

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