Candlestick

What Is a Candlestick?

A candlestick is a graphical representation of price action that shows the open, high, low, and closing prices for an asset within a specific time period.

How to Read a Candlestick

Ascending (bullish) candlestick

1: Upper wick, the highest traded price in that period

2: Close price, or last traded price in that period

3: Open price, or first traded price in that period

4: Lower wick, the lowest traded price in that period

Descending (bearish) candlestick

1: Upper wick, the highest traded price in that period

2: Open price, or first traded price in that period

3: Close price, or last traded price in that period

4: Lower wick, the lowest traded price in that period

The color of a candlestick indicates the direction of price movement. A green or hollow candlestick typically signals that the closing price was higher than the opening price, meaning buyers were dominant during that period. A red or filled candlestick generally indicates that the closing price was lower than the opening price, suggesting sellers had the upper hand.

Why Candlesticks Matter

However, candlestick patterns should not be treated as definitive signals on their own. Combining them with other indicators and sound risk management practices may help traders make more informed decisions. Learning to read candlesticks and recognize common patterns is often considered one of the foundational steps for anyone interested in trading.