Candlestick charts show price movement over time. Each “candle” tells you the opening price, closing price, high, and low for a specific period.
Anatomy of a Candlestick
High
┌─────────┐
│ │
│ Body │ ← Close (green) or Open (red)
│ │
└─────────┘
Low
Green candle: Price closed higher than it opened (bullish) Red candle: Price closed lower than it opened (bearish)
| Element | What It Shows |
|---|---|
| Open | Price at start of period |
| Close | Price at end of period |
| High | Highest price during period |
| Low | Lowest price during period |
| Body | Range between open and close |
| Wick/Shadow | Range from body to high/low |
Basic Patterns
Bullish Patterns (Price May Go Up)
Hammer: Small body at top, long lower wick. Shows sellers pushed price down but buyers pushed it back up.
Morning Star: Three candles — long red, small body, long green. Shows a reversal from downtrend to uptrend.
Bullish Engulfing: Green candle completely “engulfs” the previous red candle. Strong buying pressure.
Bearish Patterns (Price May Go Down)
Shooting Star: Small body at bottom, long upper wick. Shows buyers pushed price up but sellers pushed it back down.
Evening Star: Three candles — long green, small body, long red. Shows reversal from uptrend to downtrend.
Bearish Engulfing: Red candle completely engulfs the previous green candle. Strong selling pressure.
Time Frames
| Time Frame | Best For |
|---|---|
| 1 minute | Scalping, short-term trading |
| 15 minutes | Day trading |
| 1 hour | Short-term trends |
| 4 hours | Medium-term trading |
| 1 day | Swing trading |
| 1 week | Long-term investing |
Beginners should start with daily charts. Higher time frames produce more reliable signals.
Support and Resistance
Support: Price level where buying pressure is strong enough to prevent further decline. Resistance: Price level where selling pressure is strong enough to prevent further rise.
When price breaks above resistance, that level often becomes new support. When price breaks below support, that level often becomes new resistance.
Common Mistakes
- Over-analyzing — Not every candle pattern is significant
- Ignoring the trend — Always check the longer-term trend first
- Using only candles — Combine with volume and other indicators
- Short time frames — Minute charts are noisy and unreliable
- Confirmation bias — Seeing patterns that aren’t there
Verdict
Candlestick charts are essential for understanding price action. Focus on daily time frames, learn a few basic patterns (hammer, engulfing, morning/evening star), and always consider the broader trend. Candles are one tool — combine them with volume, support/resistance, and fundamentals.
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