How to read candlesticks
Day 02 of 26 · 7 min read · By DT Terminal
A candle is one block of time drawn as four prices: where it opened, the highest and lowest it reached, and where it closed. This lesson shows how a candle builds, how bigger timeframes are made of smaller ones, and what bodies and wicks tell you.
Asset classes
Every instrument belongs to an asset class, a group that behaves alike. You read them all with candles, but each class has its own hours and news. This course works with forex, commodities, indices and crypto, and sometimes stock CFDs.
| Class | What you trade | Examples | Hours |
|---|---|---|---|
| ForexWe trade | One currency against another. EURUSD at 1.0850 means one euro costs 1.0850 US dollars. | EURUSDGBPUSDUSDJPY | 24 hours, Sunday to Friday |
| CommoditiesWe trade | Raw materials priced in dollars. XAUUSD is one ounce of gold. | XAUUSDXAGUSDUSOIL | Nearly 24 hours, Sunday to Friday |
| IndicesWe trade | A basket of a country's biggest shares, traded as one price. | NAS100US30GER40 | Nearly 24 hours, busiest at the exchange open |
| CryptoWe trade | Digital currencies priced in dollars. | BTCUSDETHUSD | Every day, weekends included |
| Stock CFDsSometimes | One company's share price, without owning the share. Can gap on earnings. | AAPLNVDATSLA | Exchange hours, 09:30 to 16:00 New York |
The same hours as a week. Each bar is when that class can trade:
Go deeper
Not the focus of this course: owning shares outright, and bonds, which matter here as a driver of currencies rather than as something to trade.
Long and short
You can make or lose money in either direction. Every diagram from here on comes in both directions, so these two words need to become automatic.
You buy, and gain if price goes up. Buy EURUSD at 1.0850 and close at 1.0900: the 0.0050 move is yours, less costs. If price falls instead, you lose the difference.
You sell first, and gain if price goes down. Sell XAUUSD at 4,120.00 and buy it back at 4,100.00: the 20.00 move is yours, less costs. If price rises instead, you lose the difference.
The candle
A candle sums up one block of time in four prices: open, high, low and close, or OHLC.
The body runs from open to close. The wicks show how far price travelled before coming back.
On a real chart, candles sit side by side:
DT Terminal ChartsEURUSD · H1Example 01
A Saturday candle on BTCUSD
BTCUSD · D1Bearishlong upper wickOpen 118,420, high 119,870, low 116,950, close 117,310.
Crypto trades every day, so BTCUSD prints a Saturday candle.
| Part | Working | Result |
|---|---|---|
| Colour | Close 117,310 is below open 118,420 | Bearish, red |
| Body | 118,420 - 117,310 | 1,110 |
| Range | 119,870 - 116,950 | 2,920 |
| Upper wick | high 119,870 - open 118,420 | 1,450 |
| Lower wick | close 117,310 - low 116,950 | 360 |
Go deeper
EURUSD has no Saturday candle: forex closes Friday at 17:00 New York time and reopens Sunday at 17:00.
Open and close swap places between the two colours: on a green candle the open is the bottom of the body, on a red one it is the top. The same reading applies to every candle on the chart.
Weekend trading is often thinner than weekday trading, so a weekend candle can move further on less activity.
How a candle forms
Here is one hour of EURUSD drawn as a line, and the 1 hour candle it produces. It plays once when you reach it; drag the slider to scrub through the hour, or replay it. Watch the body change colour each time price crosses back over the open.
- Time
- 13:00
- O
- 1.08485
- H
- 1.08620
- L
- 1.08380
- C
- 1.08575
Timeframes
The timeframe is how much time each candle covers: 15 minutes on M15, 4 hours on H4. Same market; each candle just sums up more or less.
Bigger candles are built from smaller ones. Four 15 minute candles become one 1 hour candle: the first one's open, the highest high, the lowest low, and the last one's close.
| Code | One candle | Per day |
|---|---|---|
| M1 | 1 minute | 1,440 |
| M5 | 5 minutes | 288 |
| M15 | 15 minutes | 96 |
| H1 | 1 hour | 24 |
| H4 | 4 hours | 6 |
| D1 | 1 day | 1 |
Watch four candles become one
One day, two timeframes
Forex days end at 17:00 New York time, so many brokers run charts on GMT+2 (GMT+3 in the US summer). D1 then runs 00:00 to 24:00 on that server clock, as do the H4 candles below.
Example 02
One NAS100 day, on D1 and on H4
NAS100 · H4Bullish D1six H4 candles, one D1D1: open 24,150.0, high 24,326.5, low 23,962.0, close 24,302.0.
On D1 the day is one calm, bullish looking green candle.
The D1 candle, worked out
D1: open 24,150.0, high 24,326.5, low 23,962.0, close 24,302.0. On H4 the 16:00 candle closed 187.5 points below its open.
The D1 body is 24,302.0 - 24,150.0 = 152.0 points and its lower wick 24,150.0 - 23,962.0 = 188.0.
Bodies and wicks
The body shows where price was accepted. The wicks show where price went and was pushed back.
Big body, small wicks
One side was in control from open to close: momentum. A red version means sellers were in control.
Long wick
Price pushed into a level and was rejected. A long lower wick means lower prices were refused; a long upper wick means higher prices were.
Doji
Open and close are almost the same price. Neither side won the period: indecision, often before a move.
At a level, a wick through it only says price visited. The close says whether price stayed.
DT Terminal ChartsXAUUSD · H1Example 03
Five hours of XAUUSD, one candle at a time
XAUUSD · H1Refusedwick above, close below16:00 high 4,126.30. Candle 5 high 4,134.60, close 4,121.00.
| # | Time | Open | High | Low | Close | What it says |
|---|---|---|---|---|---|---|
| 1 | 13:00 | 4,118.20 | 4,121.90 | 4,104.60 | 4,106.10 | Big red body, small wicks. Sellers controlled the hour from open to close. |
| 2 | 14:00 | 4,106.10 | 4,109.30 | 4,091.80 | 4,107.40 | Long lower wick, tiny body. Price fell to 4,091.80 and was pushed all the way back: lower prices were refused. |
| 3 | 15:00 | 4,107.40 | 4,112.80 | 4,102.50 | 4,107.70 | Doji. Open and close almost equal: neither side won the hour. |
| 4 | 16:00 | 4,107.70 | 4,126.30 | 4,106.90 | 4,124.80 | Big green body. Buyers controlled the hour and closed it near its high. |
| 5 | 17:00 | 4,124.80 | 4,134.60 | 4,119.20 | 4,121.00 | Long upper wick. Price traded above the 16:00 high but the hour closed back below it: higher prices were refused, not accepted. |
Candle 2, worked out
Candle 2 is the clearest wick: its lower wick is 4,106.10 - 4,091.80 = 14.30 of a 17.50 range, against a body of only 1.30.
Practise reading closes
XAUUSD on H1, one candle at a time, and read each close before the next one prints.Check yourself
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