What are candlesticks?
Candlesticks are one of the most important parts of trading and charting, and here's why.
Each candle tells a complete story of what happened during a specific period of time. It shows where the price opened, where it closed, how high it reached, and how low it fell.
For example:
A 5-minute candle represents everything that happened during those 5 minutes
A 1-hour candle represents everything that happened during that hour
Candlesticks are the foundation of technical analysis and are the most commonly used chart type among retail traders.
Understanding the anatomy of a candle
Before we start analyzing candles, we first need to understand the basics.
A candlestick has two main parts:
Wick (Shadow)
Body
The wick high is the highest price reached during that period.
The wick low is the lowest price reached during that period.
The body shows where the candle opened and where it closed.
Bullish vs Bearish candles
For a bullish (green) candle:
The opening price is at the body low.
The closing price is at the body high.
For a bearish (red) candle:
The opening price is at the body high.
The closing price is at the body low.
Regardless of whether the candle is bullish or bearish:
The highest wick is called the candle high.
The lowest wick is called the candle low.
Why is this important?
Understanding candlesticks is the foundation of technical analysis.
Every strategy you'll learn later starts with understanding how to read a single candle. Once you're comfortable reading candles, learning concepts like market structure, swing points, breakouts, and fakeouts becomes much easier.