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Reading a candlestick chart

What each candle tells you, how timeframes work, and the only three things to look at first.

6 min read

Every candle on a chart is one slice of time: one minute, five minutes, an hour, a day. It shows four prices for that slice: where it opened, where it closed, the highest point and the lowest point.

HighCloseOpenLowUp candleOpenCloseUpper wickBodyLower wickDown candle

Body and wicks

  • Green (up) candle: closed higher than it opened. Red (down) candle: closed lower.
  • The thick body is the distance between open and close.
  • The thin wicks show how far price stretched before pulling back. A long wick means price tried to go there and got rejected.

Timeframes

The same stock looks completely different on a 1-minute chart and a daily chart. Shorter timeframes show more noise; longer ones show the bigger trend. Day traders often use 5-minute or 15-minute charts but check the hourly or daily chart for direction.

What to look at first

  • Which way is it trending? (next lesson)
  • Where are the obvious levels price keeps reacting to? (lesson 4)
  • Is volume (the bars under the chart) bigger than usual? Big moves on big volume matter more.

Key takeaways

  • ✓Each candle = open, high, low, close for one slice of time.
  • ✓Long wicks show rejection.
  • ✓Use a higher timeframe for direction, a lower one for timing.

Quick check

A candle opens at $50, trades up to $53, down to $49, and closes at $52. What color is it?

Education only, not financial advice. Trading involves substantial risk of loss.