What are candlesticks and how do you read them?

Every candlestick sums up the whole fight between buyers and sellers over one period — an hour, a day — in a single shape: where price opened, where it closed, and how far it stretched at the extremes. Learning to read them is learning the basic language of the chart. This guide covers what one candle tells you, then the essential patterns grouped by what they signal: indecision, a possible turn up, a possible turn down, or the trend simply continuing.

What does a single candle tell you?

A candle has two parts. The body runs from the opening price to the closing price: if the close is above the open, the candle is bullish (usually drawn green); if it is below, bearish (red). The wicks, or shadows — the thin lines above and below — mark the high and low that price reached before pulling back.

Everything else follows from that: a large body says one side clearly dominated; a small body with long wicks says there was a fight and nobody won. When a candle has almost no wicks and is all body, it is called a marubozu: total conviction, price opened at one extreme and closed at the other without looking back. Don't memorize shapes yet; internalize this: body = who won; wick = how far the fight reached.

What does indecision look like? Doji and spinning top

These are single candles with a tiny body: the market opened and closed in almost the same place. They don't predict direction on their own — they warn that the current push is running out of steam.

• Doji: open and close practically equal, forming a cross. Its name changes with where the wicks sit: long-legged (long wicks both sides, maximum indecision), dragonfly (long lower wick, rejection of lower prices) and gravestone (long upper wick, rejection of higher prices).
• Spinning top: a small body with wicks on both sides. Like the doji, it says buyers and sellers ended level.

Which ones signal a turn up?

They show up after a fall and suggest buyers are starting to take control. The lower they appear, on a support level, the more weight they carry.

• Hammer: small body up top and a long lower wick. Price dropped, but buyers pushed it back before the close.
• Inverted hammer: the mirror, with the long wick on top; a first bullish attempt after the fall.
• Bullish engulfing: a large green candle that completely "swallows" the body of the previous red one. A clear shift of power.
• Bullish harami: a small candle that fits inside the body of the previous red one — the fall is losing momentum.
• Morning star: three candles — a big red one, an indecision candle, and a big green one. A rounded bottom in miniature.
• Three white soldiers: three green candles in a row with growing bodies. Confirmed upward momentum.

Which ones signal a turn down?

They are the exact mirrors of the bullish ones: they appear after a rise, especially at a resistance level, and warn that sellers are back.

• Shooting star: small body at the bottom and a long upper wick. Price rose but was rejected.
• Hanging man: same shape as the hammer, but after a rise — the context flips the meaning.
• Bearish engulfing: a large red candle that engulfs the body of the previous green one.
• Bearish harami: a small candle inside the body of the previous green one; the rise runs out of breath.
• Evening star: big green, indecision, big red. A top in three candles.
• Three black crows: three red candles in a row with growing bodies. Confirmed downward momentum.

Which ones say "this continues"? Continuation patterns

Not every shape signals a reversal. Some confirm that the trend, after a pause, is about to continue. The classic is the three-method pattern: in an uptrend, a big green candle, then three small candles that pull back without breaking the range of the first, and another big green candle that resumes the climb. The bearish version is identical in reverse. The read: the pause was just a breather, not a change of side.

The golden rule: context is everything

This is the mistake that wrecks beginners: treating each pattern as an automatic buy or sell signal. It isn't. A hammer in the middle of nowhere is worth almost nothing; that same hammer right on a major support level, after a fall and with volume, is a real signal. The difference is confluence: the pattern lines up with a level you were already watching.

Two practical rules that pay off on their own:

1. Confirm on the close, not the wick. A wick can pierce a level and snap back; what counts is where the candle closes.

2. The pattern gives you a map, not a guarantee. It marks where the odds shift and where to place your stop — never a certainty.

Pair this reading with the pair's volatility: the same candle means something different in a calm market than in a choppy one.

The bottom line

A candle sums up the period's battle in body and wicks. The patterns aren't magic: they are ways to recognize when one side is exhausted (indecision), when the other takes control (reversal), or when the trend is only pausing (continuation). Learn them by what they mean, not by rote, and always use them in context — on a level, confirmed by the close. That is where a candle stops being a drawing and becomes information.