Candlesticks: how to read a candlestick chart

A Japanese candlestick shows price movement within a single time interval, for example an hour or a day. It consists of a body, which connects the opening and closing price, and shadows (wicks) reaching to the high and low of the period. The color or fill of the body shows whether price closed higher or lower than it opened.

A single candle carries limited information, and its interpretation depends on context: the trend, key levels and volume. Named candlestick patterns, such as the hammer or the engulfing pattern, can be unreliable and give false signals. They do not work on their own, so treat them as an add-on to your analysis, not a ready-made trade signal. A candle is final only after its time interval ends.