What is a Candlestick in Trading?
A candlestick is a price chart element that displays the open, high, low, and close of a given time period. The rectangular body shows the range between open and close, while the wicks (shadows) show the high and low.
How It Works
A bullish (green/white) candle means the close was higher than the open. Buyers dominated that period. A bearish (red/black) candle means the close was lower than the open. Sellers dominated. The length of the body shows conviction. A long body means strong directional momentum. A small body (doji) means indecision, where open and close were nearly the same. Long wicks indicate rejection: the price tried to move in one direction but got pushed back. Candlestick timeframes range from 1 minute to monthly. A 1-hour candle shows the OHLC for that hour. A daily candle shows the OHLC for the full trading day. Higher timeframes generally carry more weight.
Why It Matters
Candlesticks are what almost all technical analysis is built on, including smart money concepts. Order blocks, imbalances, and structural shifts are all identified through candlestick patterns. Reading candles accurately comes before every other charting concept.
Common Mistake
Memorizing dozens of candlestick pattern names without understanding what the candle actually shows about buying and selling pressure. A 'hammer' is a long lower wick. Sellers pushed price down and buyers pushed it back. The story matters more than the label.
Example
A daily candle on EUR/USD opens at 1.1050, drops to a low of 1.1020, rallies to a high of 1.1085, and closes at 1.1078. The body spans 1.1050-1.1078 (bullish), with a lower wick of 30 pips showing strong buying rejection.
Stoic Insight
Epictetus: 'First say to yourself what you would be; and then do what you have to do.' Before memorizing patterns, understand what a single candle tells you: who dominated that period, how strongly, and where they gave up.
Related Terms
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