Every price chart answers one question: what did people actually pay, and when? A candlestick chart answers it four facts at a time, and once you can read one candle you can read any chart — any pair, any timeframe, any platform. This sheet builds the candlestick from the raw price feed up, shows you the same market at three zoom levels, and introduces a small set of formations worth knowing. It will not promise that any of them predicts anything, because none of them does on its own. A candle is a report about pressure between buyers and sellers. Learning to read the report accurately is the whole skill.
From price feed to candle
Underneath every chart runs a stream of ticks — individual price updates, often several per second in a busy pair. No screen can display that stream raw, so charts compress it. Pick a period — five minutes, one hour, one day — and the chart summarises everything that happened inside it with four numbers: the first price traded (the open), the highest price reached (the high), the lowest (the low), and the final price when the period ended (the close). Traders call this OHLC data, and every chart type you will ever meet is some way of drawing it.
Build one by hand, once, and the format stops being mysterious. Suppose EUR/USD, over a single hour, opens at 1.0850, climbs as far as 1.0876, dips to 1.0842, and finishes at 1.0868 — illustrative numbers, like every example in this survey. Draw a thin vertical line from 1.0842 up to 1.0876: that is the full range the price visited. Now thicken the section between 1.0850 and 1.0868 into a rectangle: that is the body, from open to close. Because the close sits above the open, the candle is drawn in the platform's up colour. You have just drawn an H1 candle, and every candle ever printed was constructed exactly this way.
Bodies and wicks: what each actually records
The body is the period's net result — where the price started and where it ended. The thin lines above and below it, called wicks, record the excursions: prices that traded during the period but did not survive to the close. A long upper wick states a plain fact — buyers pushed the price up there, and it did not stay. A long lower wick states the mirror fact about sellers. Nothing about a wick is mystical; it is the part of the hour's journey that was reversed before the hour ended.
Put money on the example to see why the body earns its visual weight. Our hour's body runs from 1.0850 to 1.0868 — 18 pips. On one standard lot of EUR/USD, a pip is worth about $10, so a trader who bought the open and sold the close collected roughly $180. Flip the candle — open 1.0868, close 1.0850 — and the same position loses the same $180. The chart is symmetrical by construction: every candle that paid one side $180 charged the other side $180. Any way of reading charts that forgets the second half of that sentence has stopped being analysis.
Colour is the one part of the format that is pure convention. Most platforms draw rising candles green or hollow and falling candles red or filled, and most let you change it. The information is in the four numbers, not in the paint — worth remembering when a screen full of red starts to feel like a verdict rather than a record.
Timeframes: the same market, three zoom levels
A candle covers one period of whatever timeframe the chart is set to — that is the entire definition. Set the chart to M5 and each candle compresses five minutes; set it to H1 and each compresses an hour; set it to D1 and each compresses a full trading day. The frames nest exactly: every D1 candle contains twenty-four H1 candles, and every H1 candle contains twelve M5 candles, all built from the same underlying ticks.
| Frame | One candle covers | The day appears as | Typically read for |
|---|---|---|---|
| M5 | Five minutes | Around 288 candles — every push and stall visible | Timing an entry or exit already decided elsewhere |
| H1 | One hour | 24 candles — the day's sessions and turns | The rhythm of the current day or week |
| D1 | One full trading day | A single candle — one open, one close | The market's longer direction and context |
Because each frame summarises differently, each tells a different story about the same facts. A quiet D1 candle with a small body can contain an M5 day of violent swings in both directions; a smooth-looking H1 climb can hide three sharp pullbacks. Volatility that dominates one frame can be invisible on another. None of the views is more true — they are the same data at different resolutions, and which one matters depends on how long you intend to hold a position. A later sheet on multiple-timeframe analysis turns this into a working method; for now it is enough to always know which frame you are looking at.
A starter set of formations — read as pressure reports
Candlestick folklore catalogues dozens of named patterns. You do not need the catalogue. You need a handful of shapes you can read fluently — and one firm rule about what a shape is. A formation is a report about pressure: it tells you how the contest between buyers and sellers went during the last period or two. It is evidence, sometimes useful evidence in the right context. It is not an instruction, and this survey will never present one as a signal to trade.
The doji: a stand-off
A doji is a candle whose open and close are almost equal — a tiny body, often with wicks on both sides. The report it files: the price travelled and came back, and neither side held an advantage by the close. Context decides whether that matters. After a long one-directional run, a doji is evidence that the pressure driving the run has at least paused. In the middle of a quiet range it means very little, because stand-offs are what ranges are made of.
The engulfing candle: a shift
An engulfing formation is two candles: the second body completely covers the first, in the opposite direction — a small rising body followed by a larger falling one, or the mirror image. The report: within two periods, control changed hands decisively enough that the second period undid the first and more. It is one of the more legible shifts a chart can print, and it still fails routinely. "Pressure changed for two periods" is a fact; "the trend has reversed" is a forecast the formation does not contain.
The hammer: a failed push lower
A hammer is a candle with a long lower wick and a small body near the top of its range, appearing after a decline. The report: sellers drove the price well down during the period, and by the close buyers had taken nearly all of it back. The push lower failed — this period. Whether the next period's push fails too is exactly the question the candle cannot answer, which is why hammer entries taken on the shape alone perform no better than the surrounding context allows.
Read all three the same way: as sentences in a report, not commands on a screen. What just happened is a fact. What happens next is a probability — usually a modest one — and the survey's sheet on chart patterns examines how modest, with the published evidence on the table.
Line and bar charts: when they are enough
Two older chart types display the same information with less ink. A line chart joins only the closes, discarding the other three facts — and for some jobs that is a feature: when you want the long-term direction of a market without the noise of every excursion, a line of daily closes is the calmest possible view. A bar chart keeps all four OHLC values, drawn as a vertical line with small side-ticks for open and close — identical content to a candle, just thinner. Candles dominate because the body makes direction readable at a glance, not because they contain anything extra. If anyone implies that candlesticks reveal information other charts hide, they are selling decoration.
The honesty rule
Everything on a candlestick chart already happened. That sounds too obvious to write down, and it is the single discipline that separates reading charts from believing in them. A candle describes the past with complete precision: this is where the period opened, ranged, and closed. About the future it is silent. Formations shade that silence into probabilities — sometimes slightly better than a coin in the right context, with failure as a permanent companion. Any course or video that presents a candle pattern as something that simply works is making a probability claim with the probability removed.
The candle is the alphabet. The next sheets on the Reading the Chart route put the letters into words: support and resistance — the areas where price has reacted repeatedly — and then trendlines, drawn with a method strict enough to stop you fooling yourself. None of it requires an account or a deposit; all of it can be practised on a demo chart with live prices and no money at risk.
Live market prices, practice balance — read real candles with nothing at risk.
Tick, wick, timeframe, volatility — every term this sheet uses, defined in plain language.