Reading Candlestick Charts
Learn to read candlestick charts — the universal language of every technical trader.
Candlestick charts are the most popular way to visualize price data in trading. Invented in Japan in the 18th century, they pack four key data points — open, high, low, close — into a single visual element.
Anatomy of a Candlestick
- Body: The thick part — shows the open and close price
- Upper wick: Thin line above body — highest price reached
- Lower wick: Thin line below body — lowest price reached
- Green candle: Price closed HIGHER than it opened (bullish)
- Red candle: Price closed LOWER than it opened (bearish)
Key Candlestick Patterns
Doji
Open and close are nearly equal, creating a cross shape. Signals market indecision — often appears before reversals.
Hammer
Small body at the top with a long lower wick. Appears after a downtrend and signals potential reversal upward. One of the most reliable reversal signals.
Engulfing
A large candle that completely covers the previous candle's body. Bullish engulfing (green engulfs red) signals buyers taking control. Bearish engulfing signals sellers taking control.
Tip
Focus on the close price, not the high/low. Candle closes are more meaningful than momentary wicks — wicks often represent stop-hunt traps designed to trigger stop losses.
Timeframes Explained
- 1m, 5m, 15m: For scalpers — too noisy for swing trading
- 1H, 4H: Most popular for swing signal analysis and entries
- 1D (daily): Big picture trend — always check this first
- 1W (weekly): Macro trend that determines overall market direction
Interactive Calculators
Position Size Calculator
Calculate risk-correct size for any trade
Risk Amount
$100.00
Position Size
$5000
Margin Needed
$1000.00
Formula: Risk Amount ÷ Stop Loss % = Position Size
Risk / Reward Calculator
Verify R:R before entering any trade
Risk / Reward Ratio
4.00:1
Excellent — take this trade
Risk
2.34% ($1500)
Reward
9.38% ($6000)
Min Win Rate Needed
20.0%
Verdict
VALID TRADE
Discussion3 comments
This is exactly what I needed. The 10-layer system makes sense — explains why the signal quality is so consistent.
The No-Trade Zone filters are genius. I've been burned by signals during news events so many times. Good to know there's a filter for that.
Session bonus makes a lot of sense. London/NY overlap is always the most liquid period. Low liquidity breakouts are notorious fakeouts.