A candlestick chart draws each period of trading as one candle showing four prices: where price opened, how high and how low it went, and where it closed. Once you can read one candle, you can read a chart of hundreds. Every pattern in the Technical analysis course is built from these four prices.
What you will learn
- What open, high, low and close (OHLC) mean on a chart
- How to read a candle's body and wicks, and tell a bullish candle from a bearish one
- How the timeframe changes what one candle covers
- What a candlestick chart cannot tell you
Open, high, low, close: the four prices in every candle
Each candle covers a fixed period, such as one minute, one hour or one day. Within that period it records four prices, known together as OHLC.
- The open is the first price traded in the period.
- The high is the top price reached.
- The low is the bottom price reached.
- The close is the last price of the period.
While a period is still running, its candle is not finished. The close is just the latest price, and the high, low and body keep changing until the period ends.
How do you read a candle's body and wicks?
The body is the thick part between the open and the close. The wicks, also called shadows, are the thin lines above and below the body. They reach up to the high and down to the low.
If the close is above the open, price rose during the period and the candle is bullish. It is usually drawn green or hollow. If the close is below the open, the candle is bearish and usually drawn red or filled. Colours are a chart setting, so check which way round yours are.
Take a one-hour EUR/USD candle that opens at 1.0850, reaches a high of 1.0872 and a low of 1.0841, and closes at 1.0866.
- The close is above the open, so the candle is bullish.
- The body is 1.0866 minus 1.0850, or 16 pips.
- The upper wick is 1.0872 minus 1.0866, or 6 pips.
- The lower wick is 1.0850 minus 1.0841, or 9 pips.
- The full range, high to low, is 31 pips, and the close sits 25 pips above the low, about 80% of the way up the range.
So during that hour, price traded 9 pips below its open and 22 pips above it, and finished 16 pips higher, near the top of the range. The candle does not tell you whether the low or the high came first. A lower timeframe does, as the next section shows.
The shape of a candle hints at who was in control. A long body with short wicks means price moved mostly one way for the whole period. A small body with long wicks means price travelled both ways and ended near where it started, which traders read as indecision. A long upper wick means price was pushed up and then sold back down, often called rejection; the candlestick patterns lesson covers candles built on that shape.
How does the timeframe change a candle?
The timeframe is the period each candle covers. Platforms commonly label them M1, M5, M15 and M30 for minutes, H1 and H4 for hours, D1 for a day and W1 for a week, though yours may write them differently.
A higher-timeframe candle is made from the lower-timeframe candles inside it. Here are the four 15-minute candles that make up the hourly candle above.
- 09:00 candle: open 1.0850, high 1.0858, low 1.0841, close 1.0855.
- 09:15 candle: open 1.0855, high 1.0863, low 1.0849, close 1.0861.
- 09:30 candle: open 1.0861, high 1.0872, low 1.0857, close 1.0869.
- 09:45 candle: open 1.0869, high 1.0870, low 1.0860, close 1.0866.
The hourly candle takes the open of the first one (1.0850), the top of the four highs (1.0872, at 09:30), the bottom of the four lows (1.0841, at 09:00) and the close of the last one (1.0866). Now you can see the order: the low came in the first quarter-hour and the high in the third.
The same 31-pip range means more on an hourly chart than on a daily one, because a daily candle holds 24 hours of movement. Platforms also label each candle by its opening time in the platform's own time zone, which may not be UK time, so a daily candle can start at a different hour from one platform to the next. The trading sessions lesson explains why that matters.
What a candlestick chart leaves out
A candle shows four prices and nothing about what happened between them, so the order of the high and low is hidden unless you drop to a lower timeframe.
Many platforms also draw candles from the bid price only. A buy fills at the ask, which is higher by the spread, so a buy limit can stay unfilled even when the chart's low touches your level. If an order did not fill where the chart suggests it should have, compare the two sides of the quote first. Order types covers how each order uses the bid and the ask.
From single candles to patterns
Groups of one to three candles form the patterns traders watch for, such as engulfing candles, dojis and hammers. The Technical analysis course starts with candlestick patterns, and everything in it relies on reading the open, high, low and close the way you have here.
Check your understanding
A daily GBP/USD candle opens at 1.2700, has a high of 1.2745 and a low of 1.2690, and closes at 1.2705. Describe it.
It is a bullish candle with a 5-pip body, a 40-pip upper wick and a 10-pip lower wick, across a 55-pip range. Price rose 45 pips above the open but closed only 5 pips above it, so most of the rise was sold back.
You build an hourly candle from six 10-minute candles. Where do its four prices come from?
The open is the first candle's open, the close is the last candle's close, and the high and low are the top and bottom prices reached across all six.
Can one hourly candle tell you whether the high or the low came first?
No. Look at a lower timeframe, such as the 15-minute or 5-minute chart, to see the order.
Key points
- Every candle records four prices for its period: open, high, low and close.
- The body runs from open to close; the wicks reach the high and the low.
- A close above the open makes a bullish candle, and a close below it makes a bearish one.
- A higher-timeframe candle is built from the lower-timeframe candles inside it.
- Many charts plot the bid only, so a buy can need the price to go one spread further than the chart shows.
Next: test what you have learned in the course quiz
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