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Candlesticks are a financial price display in which each candle summarizes an asset’s open, high, low and close (OHLC) for one selected interval, such as a minute, hour or day. The real body spans the open and close; shadows, also called wicks, extend beyond it toward the interval’s high and low.
Reading a Candle
The open and close are the interval’s first and last prices; the high and low are its extremes. The upper shadow runs from the higher body edge to the high; the lower shadow runs from the lower edge to the low. If an extreme equals its corresponding body edge, that shadow is absent.
A rising candle closes above its own open; a falling candle closes below it. Candlesticks commonly show rising intervals as green, white or hollow and falling intervals as red, black or filled, but appearance is configurable. If previous-close coloring is enabled, color instead compares the current close with the previous candle’s close, so it may disagree with open-to-close direction. Check the chart’s legend and settings rather than color alone.
A Hypothetical OHLC Example
In a hypothetical interval, the open is 100, high 108, low 97 and close 105. The candle rises, with a body from 100 to 105, an upper shadow of 108 − 105 = 3 and a lower shadow of 100 − 97 = 3. Both paths—100 → 97 → 108 → 105 and 100 → 108 → 97 → 105—produce that candle. Candlesticks therefore do not reveal which extreme came first or the complete price path within the interval.
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Get startedRecognizing Common Patterns
Technical analysts interpret individual candlesticks and sequences as possible reversals of a trend, continuations of it, or indecision. In the table, bullish means an upward interpretation and bearish means downward. The table follows classic recognition conventions, including the stated gaps—price separations between intervals.
A doji has virtually equal open and close, with little or no body. It is neutral alone; a directional reading needs context and confirmation.
A hammer has a small body of either direction, a long lower shadow and little or no upper shadow after a decline—a potential bullish reversal. The same geometry after an advance is a hanging man, a potential bearish reversal. In both, recovery does not erase the selling shown by the low.
An inverted hammer has a small body of either direction, a long upper shadow and little or no lower shadow after a decline. Its attempted rise failed to hold, so a potential bullish reversal needs later strength. A shooting star shares that geometry after an advance, with a classic opening gap higher into star position above the preceding body. Its rally failed to hold its highs; a bearish-reversal reading needs confirmation.
Piercing line follows a decline: a long falling candle, then a rising candle opening below the prior low and closing above the first body’s midpoint. Dark cloud cover follows an advance: a long rising candle, then a falling candle opening above the prior high and closing below the first body’s midpoint. These are potential bullish and bearish reversals, respectively. The stated midpoint tests alone do not exclude the second body also engulfing the first.
Candlestick Pattern Reference
| Pattern | Preceding Trend | Candles | Conditional Interpretation | Key Feature |
|---|---|---|---|---|
| Bullish Engulfing | Preceding TrendDecline | Candles2; small falling, larger rising | Conditional InterpretationPotential bullish reversal. | Key FeatureSecond body contains the first; shadows need not be engulfed. |
| Morning Star | Preceding TrendDecline | Candles3; long falling, small middle, long rising | Conditional InterpretationPotential bullish reversal. | Key FeatureMiddle body gaps below the first; third opens with a gap above the middle body's upper edge and closes above the first body's midpoint. |
| Bullish Harami | Preceding TrendDecline | Candles2; falling, then small rising | Conditional InterpretationPotential bullish reversal. | Key FeatureSecond body lies inside the first; its shadows need not be contained. |
| Bearish Engulfing | Preceding TrendAdvance | Candles2; small rising, larger falling | Conditional InterpretationPotential bearish reversal. | Key FeatureSecond body contains the first; shadows need not be engulfed. |
| Evening Star | Preceding TrendAdvance | Candles3; long rising, small middle, falling | Conditional InterpretationPotential bearish reversal. | Key FeatureMiddle body gaps above the first; third closes below the first body's midpoint. |
| Dragonfly Doji | Preceding TrendContext-dependent | Candles1; little or no body | Conditional InterpretationNeutral alone; potential reversal in either direction. | Key FeatureIdeally open, high and close coincide; long lower shadow and no upper shadow. |
Context and Limits
Confirmation means later price action consistent with a pattern—for example, further strength after a hammer. It adds support, not certainty: the preceding trend and wider price context still matter. Candles record prices, whereas reversal and continuation forecasts remain interpretations.
Standard OHLC bars encode the same four observations differently. Some readers find candlesticks easier to read, but that preference adds neither price data nor evidence of better forecasting.
