How to Read a Candlestick

Michael Whitman · Trading since 2017, full-time since 2020 · Published 2026-09-05 · Updated 2026-09-26 · Reviewed 2026-09-26

Covered on this page: TradingView.

Candlesticks show four prices for one period: the open, the high, the low and the close, with a thick body from open to close and thin wicks out to the high and low. Green means the period closed above its own open, not above the previous close, and on 17.3% of SPY trading days since 1993 those two disagreed.

Candlesticks are what every price chart is built from, so it is worth being exact about what one actually contains — and about the three things people read into them that are not there.

How to read one

A candlestick is four prices for one slice of time.

The open is where the period started. The close is where it ended. The high and low are the furthest price reached in each direction. The thick part is the body, spanning open to close, and the thin lines are wicks, reaching out to the high and the low.

If you are on a one-hour chart, each candle is one hour of trading compressed into those four numbers. Everything else on the chart is drawn on top.

Green and red: color measures open to close, not up or down

Green means the close was above the open. Red means it was below. That is the entire meaning, and it is worth stating because beginners routinely read color as strength or as a signal.

It is not the same as the day being up. A market that gaps down at the open and then climbs all session prints a green candle on a down day. One that gaps up and drifts lower prints a red candle on an up day.

A red candle in a strong uptrend is not a warning. It is one period that finished lower than it started, which happens constantly inside moves that go straight up.

A long wick is a rejection

A long wick points at a price the market visited and would not stay at. It tells you where the rejection happened, which is genuinely useful — and it says nothing at all about what comes next.

When open and close are nearly equal

A candle with almost no body covered its range and ended where it started. It is not a prediction — it is an accurate description of a period in which nobody won. On SPY’s daily chart about one day in ten looks like this, with a body no bigger than a tenth of the range, so it is an ordinary sight rather than an event.

The candle on the right is still moving

Worth knowing early, because it catches almost everyone once.

The rightmost candle is not finished. On a one-hour chart it is being built for the whole hour. Its high and low only ever grow, and its close is wherever price happens to be right now — so it changes every second until the hour ends.

That means a candle can look like a perfect rejection at minute forty and close as something else entirely at minute sixty. The shape you are looking at is not the shape it will end up as.

This is the concrete reason behind the rule that a break needs a close beyond a level rather than a touch. Until the period ends, there is no close to speak of — only a price that is still moving.

A candle is an arbitrary box

This is the part most explanations leave out, and it changes how you read everything above.

Nothing in the market knows when your candle starts or ends. The boundaries come from the timeframe you happened to open. A dramatic wick on the five-minute chart may not exist at all on the one-hour, because the hour closed somewhere else entirely.

So a candle is not an event. It is a summary, and you chose the length of the summary.

Where it printed matters more than its shape

Two identical candles, one at a level that already mattered and one in the middle of nowhere. The shape is the same and the meaning is not. A rejection candle at a level is a rejection of that level; the same candle floating in open space is a period of trading.

This is why candle shapes learned on their own tend not to survive contact with a real chart. It is also the reason price action — reading a chart from the bars alone, with no indicator on it — is harder than it sounds: the bars do not carry their own context.

Check the bar underneath

Volume says how much actually traded. The same candle on heavy volume and on light volume are different events, and the volume panel is right there under the chart by default.

A worked example

Picture a candle with a long lower wick (often called a hammer) and read it honestly. The doji above is its cousin: wicks on both sides instead of one.

What you know. Price opened, fell a long way, came back, and closed near its open. That is not interpretation — it is the four numbers.

What you can infer. Sellers pushed price down and could not keep it there. Something met them lower and pushed back before the period ended.

What you cannot infer. Anything about the next candle. The rejection is a fact about the period that just finished, not a statement about the one that has not started.

What makes it usable. The level it rejected from, whether that level existed before today, and whether the volume was unusual. Three checks that live outside the candle itself.

One real candle: SPY on 18 September 2026

SPY opened at $761.31, traded up to $762.00 and down to $757.97, and closed at $761.69. The range was $4.03. The body, $0.38, was 9.4% of it; the lower wick, from $761.31 down to $757.97, was $3.34, or 82.9% of the range; the upper wick was $0.31, or 7.7%. By shape, a textbook hammer, and green.

The day before had closed at $762.60, so the fund finished $0.91 lower on a green candle. Both facts are true at once: buyers won the session from the open, and the day still lost ground from yesterday’s close. Anyone reading the color as “an up day” had the day wrong before reading anything into the shape.

The original data

How SPY’s daily candles actually look

We measured every SPY daily candle from 29 January 1993 to 25 September 2026: 8,472 bars, all of them valid (high at or above the open and close, low at or below both, high above low). Prices are Yahoo Finance’s unadjusted daily open, high, low and close.

4,431 candles were green (52.3%), 3,956 red (46.7%), and 85 opened and closed at the same price.

On 1,462 of 8,471 days with a prior close, 17.3%, the color disagreed with the day’s change: 683 green candles on days the close was below the previous close, and 779 red candles on days it was above. Put the other way, 17.7% of SPY’s 3,869 down days printed green and 17.2% of its 4,540 up days printed red. Roughly one candle in six says the opposite of the day’s change.

The median body filled 46.9% of its candle’s range, and 854 candles (10.1%) had a body of a tenth of the range or less.

Long lower wicks said nothing measurable about the next day. We defined one as a lower wick of at least 60% of the range with an upper wick of at most 10%, which picked out 383 candles (4.5%), split 188 green, 188 red and 7 flat. The next close was higher after 202 of them (52.7%), against 4,540 of 8,471 (53.6%) after every day. Five days on it was 236 of 383 (61.6%) against 57.9%. Neither gap is distinguishable from chance (two-sided binomial p = 0.76 and 0.15). The year-by-year counts are in the SPY candle table.

What the videos teach

Across our study of 24,971 trading videos, 645 have candlestick or candle in the title. The median one gets 7,167 views, 67% never pass 50,000, and the median length is 12.6 minutes.

The corpus carries description text for 312 of those 645, and across those 312, 4 mention invalidation, failure, or what a bad read looks like. About one in eighty.

On the most-taught topic for beginners in the entire study, nobody is describing what it looks like when the reading is wrong.

How this connects

A candle is the container everything else is built from. A moving average averages closes; an RSI compares them; a Bollinger band measures their spread. Change the candle and every one of those changes with it.

The timeframe decides what a candle even is. The same session is one daily candle or seventy-eight five-minute candles, and a pattern visible in one is invisible in the other.

Patterns are claims about the bars, not about the market. An engulfing candle describes a shape that already printed. Whether it precedes anything is a separate question that the shape cannot answer; the candlestick patterns page takes the named shapes one by one.

Support and resistance is where they become useful. A shape at a level you had already marked is a different event from the same shape in open space.

And volume sits underneath as a second, partly independent reading - the one thing on the chart not computed from price. Heikin Ashi candles go the other way and average the four prices, which smooths the picture and stops each candle showing the real open and close.

Body, wick, and which one is telling you more

The body is the conclusion. The wick is the argument. A candle that is nearly all body settled the period — price went one way and stayed there. A candle that is nearly all wick means price traveled a long way in both directions and finished roughly where it began. Same range, opposite meanings.

A long wick says price went there and did not stay. That is genuinely informative: it records rejection of a level within the period.

A long body says the period closed far from where it opened. Also informative, and about direction rather than rejection.

The two get conflated constantly. A long lower wick and a long green body are read as the same bullish signal when they describe different things - one about where price failed, one about where it finished.

And both are artifacts of where the period happens to end. Shift the session boundary by an hour and the same trading produces different candles, which is worth remembering before treating any single shape as meaningful.

When it fails

The textbook shape leads nowhere

A long-lower-wick candle can look exactly like the one in the worked example above and still be followed by price going the other way. Nothing about the candle distinguishes the two, which is the honest position and the one the 308 descriptions in the data above that never mention a failed read leave out. On SPY the next day was higher after such candles about as often as after any day.

You read the color as the day’s result

A green candle on a day that closed lower is not a contradiction; it is two different comparisons. Check the change from the previous close before calling a day up or down, because the candle’s color does not carry it.

You are reading one candle in isolation

A single candle is one period out of hundreds. It carries real information about that period and almost none about the market. The context is where the meaning is — the level, the trend, the volume.

You found it afterwards

Every meaningful candle is obvious once you can see what followed. Cover the right-hand side and most of them stop looking meaningful at all.

The wick was a single print

In a thinly traded instrument the far end of a wick can be one small order crossing a wide spread. The candle records a price visited and refused, and nothing was refused — one trade happened there and none followed it.

Check the volume bar underneath before reading a struggle into a long wick on something that trades rarely. The shape is identical whether a thousand contracts fought over that price or one went through by accident.

Related

Support and resistance is the next thing to learn, because a candle only starts meaning something once you know what it printed at.

Market structure is how single candles become a readable pattern of highs and lows.

And an order block is one specific candle picked out of a sequence, so it is worth being comfortable reading one first. For the step-by-step version with a chart open, see how to read a candlestick chart, and candlesticks vs Heikin Ashi sets the two chart types side by side.

This page is educational, not financial advice. Test every idea on your own charts before risking money. Some links on this page earn a commission if you buy through them. It costs you nothing and it does not decide what appears here or in what order — how these pages are made is set out in our methodology.