How to read the most common price chart
If you're new to trading, candlestick charts might look confusing at first. But once you understand how they work, they are one of the most useful ways to read price action.
In this guide, we’ll break down the parts of a candlestick, explain how to interpret them, and show why they matter for both beginners and experienced traders.
What Is a Candlestick Chart?
A candlestick chart is a type of price chart used in technical analysis that shows the high, low, open, and close prices for a specific time period.
Each “candlestick” on the chart represents one unit of time, such as 1 minute, 1 hour, 1 day, etc.
Anatomy of a Candle
Every candle is made up of two main parts:
- The Body: Shows the open and close prices.
- The Wicks (or Shadows): Extend above and below the body to show the high and low prices.
The color of the candle tells you if price went up or down:
- Green/Bullish Candle: Close is higher than open.
- Red/Bearish Candle: Close is lower than open.
Why Candlesticks Matter
Candlestick charts let you quickly spot patterns in price movement, things like momentum, reversals, and indecision.
Compared to line or bar charts, candlesticks give more visual context for:
- Market sentiment
- Trend strength
- Key reversal zones
Common Candlestick Signals
Here are a few basic signals traders often watch for:
- Doji – Price opens and closes at the same level, showing indecision.
- Engulfing Candle – A large candle fully wraps the previous one; traders read it as a possible reversal signal.
- Hammer / Inverted Hammer – Long wicks show rejection of lower or higher prices.
Single-candle signals are unreliable on their own. They carry more weight when they form at a meaningful level, such as support/resistance or a trendline.
Candlesticks in Context
One candle means little on its own. But groups of candles tell a story:
- Are buyers gaining control?
- Are sellers rejecting higher prices?
- Is price consolidating or expanding?
Reading price action this way gives you context that lagging indicators alone don't provide.
Final Thoughts
Reading candlesticks is a foundational skill. The same chart type is used across stocks, crypto, forex and futures, so it carries over to any market you trade.
Next, see how candles are read around support and resistance and liquidity.
– PatrickWS