How to read a candlestick chart: Japanese candles for beginners

Candlestick charts are the most popular way to look at price. Here is how one candle works, how to read them in a row, and the mistakes that trip beginners up.

4 min read · Updated: 2026-10-19

Contents

What a candle is made of
Reading one candle with an example
Timeframe: which one to use
Single candles worth knowing
Context matters more than the candle
Common beginner mistakes
How to practise
Questions and answers

What a candle is made of

Each Candlestick shows how the price moved over one period: a minute, an hour, a day. It has four prices, called OHLC:

Open: the first trade of the period.
High: the highest price in the period.
Low: the lowest price in the period.
Close: the last trade of the period.

The body is the box between open and close. The wicks (shadows) are thin lines up to the high and down to the low.

Colour shows direction. Usually a green (or white) candle closed above its open, so price rose. A red (or black) one closed below its open, so price fell. You can change the colours in chart settings, so look at where the open and close are rather than at the colour.

Reading one candle with an example

An hourly candle: open $100, high $106, low $99, close $104.

Part	Calculation	What it means
Body	$104 − $100 = $4	Buyers lifted the price 4% in the hour
Upper wick	$106 − $104 = $2	Price reached $106, but selling started there
Lower wick	$100 − $99 = $1	Sellers pushed price down briefly, with little success
Full range	$106 − $99 = $7	How far the price wandered in the hour

Result: a green candle with a solid body. Buyers were stronger, but they were held back a little at the top.

A candle is the result of the fight between buyers and sellers in one period. The body shows who won; the wicks show where price was pushed and where it met resistance.

Timeframe: which one to use

The Timeframe is the period of one candle. On a 1h chart each candle is an hour; on 1D it is a day.

Low timeframes (1m–15m) show a lot of noise: candles often contradict each other.
Higher ones (4h, 1D, 1W) are slower but matter more: levels and trends on them are more reliable.

A handy approach for beginners: read the big picture on the daily chart and look for entries on 1h or 4h. The same day is one candle on 1D and 24 candles on 1h.

Single candles worth knowing

Long body, short wicks: a confident move in one direction.
Doji: open and close almost equal. Indecision: buyers and sellers are evenly matched.
Pin bar: a small body with a long wick on one side. Price was pushed away and then brought back. A long lower wick at support hints that buyers bought the dip.
Hammer: a pin bar with a long lower wick after a decline.
Engulfing: a two-candle pattern where the second body fully covers the first and points the other way. A possible reversal signal.

There are dozens of named patterns, and you do not need to memorise them. It is enough to understand the logic: where price closed within its range, and where a long wick was left.

Context matters more than the candle

The same candle means different things in different places. Before drawing a conclusion, check:

Trend. What is the Trend on the higher timeframe? A signal with the trend is more reliable than one against it.
Level. A candle at support or resistance carries more weight than one in the middle of a range.
Volume. A reversal candle on high Volume is more convincing than one on low volume.
Close. Wait for the candle to close. While it is forming, the wicks and body can change completely.

Example. On the daily chart price has bounced off $50 three times. Today it dropped to $48.50 but closed at $50.80 with a long lower wick. That is a pin bar at support after a false breakdown, a stronger signal than the same pin bar in the middle of nowhere.

Common beginner mistakes

Entering before the candle closes. A nice hammer ten minutes before the close can turn into a plain red candle.
Trading every pattern. Without a level and a trend, most candle signals are no better than a coin flip.
Looking only at a low timeframe. The 5-minute chart shows a reversal, while the daily shows a small pullback in a strong trend.
Treating a signal as a guarantee. A pattern only improves the odds. You still need a stop, see how to set a stop-loss.

Technical analysis does not predict the future. It helps you find places where risk is clear and limited.

How to practise

Open the daily chart of BTC or EUR/USD and mark 3–4 obvious levels.
Scroll back through history and note which candles appeared at those levels before reversals.
Write your observations in a trade journal: which candle, at which level, what happened next.
After a couple of weeks you will start to see that some patterns work often at a level and almost never in the middle of the chart.

Questions and answers

What do green and red candles mean?

Green: the close is above the open, so price rose in that period. Red: the close is below the open, so price fell. You can change the colours in chart settings.

What do candle wicks show?

The high and low of the period. A long wick means price was pushed there but pulled back by the close, so there was strong pushback at that level.

Which timeframe is best for beginners?

Start with 4h and 1D: there is less noise and more time to decide. Use lower timeframes only to fine-tune entries.

Do candlestick patterns work?

On their own, weakly. At a level, with the trend and after the candle closes they are useful as part of a plan, always together with a stop-loss.