How to Read a Candlestick Chart: A Beginner's Guide

A candlestick chart shows an asset's price over time as a series of candles, where each candle captures four prices for its period, the open, the high, the low, and the close. The shape and color of each candle tell you at a glance how that period played out, which is why candlesticks are the default chart for most traders.

If you have opened a price chart and seen a column of green and red bars with thin lines poking out of them, you have looked at a candlestick chart. This page explains what each part of a candle means, how to tell an up period from a down one, and what the common shapes describe. It is descriptive throughout: it explains how to read the chart, not what to trade.

The anatomy of a candle

Each candle represents one slice of time: one minute, one hour, one day, whatever the chart is set to. It has two parts:

• The body is the thick rectangle. Its two ends are the open (the price at the start of the period) and the close (the price at the end). The body shows the net move over the period.
• The wicks, also called shadows, are the thin lines above and below the body. The top of the upper wick is the high of the period, and the bottom of the lower wick is the low. The wicks show how far price traveled before coming back.

So a single candle packs four numbers into one shape: open, high, low, and close.

Up candles and down candles

Color tells you the direction of the period. On most charts a candle is green (or hollow) when the close is higher than the open, an up period where price finished above where it started. It is red (or filled) when the close is lower than the open, a down period. The convention can be changed, but green up and red down is the common default.

Reading the body and wicks together describes the period. A long body means price moved decisively from open to close. A small body means the open and close finished close together, a period of indecision where neither side ran away with it. A long wick means price pushed in one direction during the period but was pulled back before the close, so the extreme did not hold.

What the shapes describe

Traders name common candle shapes, and the names are just shorthand for what the open, high, low, and close did. A candle with a small body and a long lower wick describes a period that sold off and then recovered by the close. A candle with almost no body, where the open and close are nearly equal, describes a standoff. None of these shapes is a prediction on its own. A candlestick chart is a record of what happened, at the resolution you choose, and reading it is reading that record.

Timeframes change the story

The same price history looks different at different resolutions. A daily chart draws one candle per day, so a month is roughly twenty to thirty candles. A five minute chart draws one candle every five minutes, so a single day is dense with them. A longer timeframe smooths out the noise and shows the broader path; a shorter one shows the detail inside each of those larger candles. Neither is more correct; they answer different questions.

You can open a candlestick chart for any stock, index, or crypto pair in Kresmion's terminal and switch the timeframe to see the same asset at daily, hourly, or minute resolution.

Key takeaways

Frequently asked questions

What do the colors on a candlestick mean?

On the common default, a green or hollow candle closed higher than it opened (an up period), and a red or filled candle closed lower than it opened (a down period). The color is set by the relationship between the open and the close, not by whether price is up over a longer stretch.

What are the thin lines above and below the candle?

Those are the wicks or shadows. The top of the upper wick marks the highest price of the period and the bottom of the lower wick marks the lowest. They show how far price ranged before the period closed, so a long wick means price reached a level it did not hold.

What is the difference between a candlestick chart and a line chart?

A line chart connects only the closing prices, so it shows the path in one clean line. A candlestick chart shows the open, high, low, and close for every period, so it carries much more detail about what happened inside each slice of time. Most traders use candlesticks for that reason.

What timeframe should a beginner use?

It depends on the horizon you care about. A longer timeframe like the daily chart shows the broader path and less noise, while a short timeframe shows the detail inside each day. There is no single right answer; the timeframe should match the question you are asking of the chart.

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Source: candlestick charting is a standard price-charting convention (open, high, low, close per period). Kresmion's terminal renders candlestick charts across stocks, indices, and crypto. This page is information, not investment advice. Kresmion Research.