Candlestick Chart

A candlestick chart displays four price points (open, high, low, close) for each time period in a visual format that quickly shows price direction and volatility. Originated in 18th century Japan for rice trading.

Candlestick Anatomy:

• Body: Rectangle between open and close
• Wick/Shadow: Lines showing high and low
• Green/White: Close > Open (bullish)
• Red/Black: Close < Open (bearish)

Common Candlestick Patterns:

Single Candle Patterns:

• Doji: Open = Close (indecision)
• Hammer: Small body, long lower wick (bullish reversal)
• Shooting Star: Small body, long upper wick (bearish reversal)
• Marubozu: Full body, no wicks (strong conviction)

Two-Candle Patterns:

• Engulfing: Second candle engulfs first (reversal)
• Harami: Small candle inside previous (reversal)
• Piercing/Dark Cloud: Partial reversal patterns

Three-Candle Patterns:

• Morning Star: Bullish reversal at bottom
• Evening Star: Bearish reversal at top
• Three White Soldiers: Strong bullish continuation
• Three Black Crows: Strong bearish continuation

Reading Candles:

• Long body = Strong conviction
• Small body = Indecision
• Long wicks = Rejection of prices
• Gap between candles = Strong sentiment shift

Best Practices:

• Confirm patterns with volume
• Context matters (where pattern appears)
• Use with support/resistance levels
• Higher timeframes = More reliable