Candlestick charts are the most popular way professional traders and investors view stock price data. They pack four data points into each candle, giving you much more information than a simple line chart.
How to Read a Single Candlestick
Each candlestick represents one time period (one day, one hour, one week — depending on your chart settings) and shows four prices:
- Open: The price when the period started
- Close: The price when the period ended
- High: The highest price during the period
- Low: The lowest price during the period
The Body
The thick part of the candle (the body) shows the range between open and close.
- Green (or white) body: The stock closed HIGHER than it opened. Bullish.
- Red (or black) body: The stock closed LOWER than it opened. Bearish.
The Wicks (Shadows)
The thin lines above and below the body show the high and low for the period.
- Long upper wick: The price went high but sellers pushed it back down
- Long lower wick: The price went low but buyers pushed it back up
- Short or no wicks: The open/close were near the high/low (strong conviction)
Basic Candlestick Patterns
Doji
A candle where the open and close are nearly identical, creating a cross or plus sign. Signals indecision. Neither buyers nor sellers won the period.
Hammer
A short body with a long lower wick at the bottom of a downtrend. The price dropped significantly but buyers pushed it back up. Can signal a potential reversal.
Engulfing Pattern
A large candle that completely engulfs the previous candle.
- Bullish engulfing: A large green candle after a red candle. Potential bottom.
- Bearish engulfing: A large red candle after a green candle. Potential top.
Shooting Star
A short body with a long upper wick at the top of an uptrend. The price rose significantly but sellers pushed it back down. Can signal a potential reversal.
What Candlesticks Do Not Tell You
Candlestick patterns are about price action and sentiment. They do not tell you:
- Why the price moved
- Whether the company's fundamentals have changed
- What will definitely happen next
Patterns are probabilistic, not predictive. A hammer at the bottom of a downtrend does not guarantee a reversal. It suggests one might be more likely.
How to Use Them as a Beginner
Start by simply observing:
- Are the candles mostly green or mostly red? (trend direction)
- Are the bodies getting larger or smaller? (momentum)
- Are there long wicks? (rejection of price levels)
Combine what you see on the chart with fundamental research for a more complete picture.
The Progressive Trailblazer combines price data with SEC filings and fundamental research. Educational only. Not financial advice.