Every guide to reading a candlestick labels the same four parts, tells you a long wick means rejection, and stops. That is where the useful part starts. A candle is a summary, and a lossy one: it keeps four prices from a session and discards the entire path between them. Reading a candle well means knowing exactly what it kept, what it threw away, and which one measurement turns a shape into a category.
What does a candlestick actually record?
Four prices, and only four. The open is where the session’s first trade printed. The high and the low are the furthest it reached in either direction. The close is the last trade before the session ended. The rectangle in the middle, the real body, runs from the open to the close. The thin lines above and below it, the wicks (also called shadows or tails), run from the body out to the high and the low.
That is the whole data set. Everything else you might want to know about the session is gone: whether the low came first or the high did, how long price sat at either extreme, whether the close was a slow drift or a last-minute burst. The candle is the same drawing either way. The bar under the candle on most charts adds one more measurement, and what volume in stocks measures covers what it can and cannot tell you.
A worked example makes the loss concrete. The prices are illustrative, chosen for round numbers, not taken from any real chart.
Two sessions on the same stock. Both open at 100, both touch a high of 104, both touch a low of 97, both close at 103.
- Session A: price slides to 97 in the first ten minutes, then climbs steadily all session, prints 104 late in the afternoon, and settles at 103. Sellers were only in control for a few minutes, and buyers held the rest of the day.
- Session B: price runs straight to 104 in the opening minutes, sells off for hours to 97, and a bid in the final half hour hauls it back to 103. Buyers were in control at the start and the end, and sellers owned the middle.
Both produce the identical candle: a green body from 100 to 103, an upper wick to 104, a lower wick to 97. One session was orderly accumulation and the other was a whipsaw, and the candle cannot tell you which. That is not a flaw to fix, it is what a candle is. Getting the path back means dropping to a lower timeframe, where the same session becomes dozens of candles that each keep their own four prices and discard their own paths. More on that below.
What is the one measurement that matters?
The single most useful thing to do with a candle is a ratio, not a name. Take the range (high minus low) and the body (close minus open, ignoring sign). Body divided by range tells you how much of the session’s travel was kept by the close, and it is the measurement underneath every single-candle category.
In the example, the range is 7 (104 minus 97) and the body is 3, so the body is a bit under half the range. That is an ordinary candle with wicks on both sides, which describes most candles on most charts. The named shapes are the extremes of that ratio.
The body is nearly the whole range. Open at one extreme, close at the other, wicks absent or negligible. This is the marubozu. One side held control from the first trade to the last, which is a statement about conviction in that session and nothing more. Bulkowski’s identification rule is simply a tall candle with no upper or lower shadow.
The body is small and pinned to one end, with a long wick on the other. Price travelled a long way in one direction and closed back near where it started. After a decline, with the wick pointing down, this is the hammer; Bulkowski’s guideline is a lower shadow at least two or three times the height of the body with little or no upper shadow. The same drawing after a rise is the hanging man. Flip the wick to the top and you have the shooting star after a rise or the inverted hammer after a decline. Four names, one ratio, and the only thing separating them is what happened before.
The body is close to nothing. Open and close virtually equal, so the candle is a cross rather than a rectangle. This is the doji, and with a small but visible body and wicks on both sides it is a spinning top. Either way the session ended where it began, and neither side kept anything it took. StockCharts’ description is the standard one: alone, a doji is neutral. Its meaning comes almost entirely from where it appears.
Once you measure rather than eyeball, a lot of pattern calls fall apart on their own. A candle whose lower wick is one and a half times its body is not a hammer, however much it looks like one on a phone screen. It is just a candle.
What does a long wick mean?
A wick records one thing: a price the session reached and could not hold. A long lower wick says sellers pushed price down there and buyers took all of it back before the close. A long upper wick says the reverse. That is the mechanism, and it is real. The trouble is that on its own it is also nearly meaningless, because sessions reach prices they cannot hold constantly, in both directions, in every market.
A long wick becomes information when two other things are true.
It needs a location. A lower wick that reaches into a level where price has turned before, or that forms after a run of falling closes, is a test of something. The same wick in the middle of a range, with nothing above or below it, is a session that wandered and came back. Rejection of what? If you cannot name the level or the prior move being rejected, the wick is not rejecting anything.
It needs the next candle. A single session’s wick is one side’s failed attempt. Whether the other side actually took over is settled by what happens next, not by the wick itself.
The hammer is the cleanest example, so here is its full read, the same way the pattern library states it. The hammer needs a measurable decline before it. It is confirmed when the next candle closes above the hammer’s high. It is invalidated by a close below the hammer’s low, because at that point the price the session supposedly rejected has been accepted, and the read is simply wrong. Naming that level before the next candle prints is the entire difference between an observation and a story. The same three parts, a prior trend, a confirming close and an invalidation price, apply to every other reversal shape, and reversal candlestick patterns lays them out one pattern at a time.
It is worth being clear-eyed about how much a lone hammer carries. Bulkowski, who has tallied candlestick outcomes across a large stock database, describes the hammer’s reversal tendency on his own site as not far from random. That is roughly what you would expect from a one-session summary with no context attached, and it is why the location and the following candle are not optional extras.
What does the colour of a candle mean?
Colour encodes one comparison: close against open. Close above open and the candle is green (or white, or hollow, depending on the platform). Close below open and it is red (or black, or filled). Nothing else. It does not encode the size of the move, how the session compares to yesterday, or where the close sits within the range.
That makes colour the least informative part of the candle, for two reasons.
First, it flips on a tick. Take a doji with a body of almost nothing: one tick above the open and it is green, one tick below and it is red. The session was identical, and the colour tells you which side won a coin toss at the last trade.
Second, it says nothing about the previous candle. A red candle can close well above yesterday’s close if the session opened on a gap up and gave part of it back, and a green candle can close below yesterday’s close after a gap down. The relationship between consecutive closes is often what matters in a sequence, and the colour does not carry it.
Conventions also differ across platforms, and this trips people up more than it should. The original Japanese convention is white for up and black for down. Most modern apps use green and red. Some draw hollow bodies for up sessions and filled bodies for down. And there is a hollow-candlestick variant, documented on the Wikipedia page cited below, where the body’s fill still compares close to open but the colour compares the close to the previous close, so a candle can be hollow and red at the same time. Before reading colour on an unfamiliar chart, check the legend. It takes five seconds and removes an entire class of misreads.
Is this candle a minute or a month?
A candle has no built-in duration. The same drawing is one minute of trading on a 1-minute chart and a full month on a monthly chart, and nothing about the shape tells you which. Every reading above applies at every timeframe, with one difference: the weight it carries.
A daily candle contains every intraday shape. The whipsaw in Session B above would appear, on a 5-minute chart, as a run of green candles, a long series of red ones, and a final cluster of green. On the daily it is one green candle with two wicks. Neither view is more real. The daily discards the path and keeps the outcome; the intraday keeps the path and buries the outcome in noise. The timeframe section of how to read a stock chart sets out what each one hides.
One consequence for markets that never close: on crypto, each open lands within a tick of the previous close, so the gap between one body and the next that some patterns depend on barely exists. The crypto post works through which readings survive that.
How do you read one candle without fooling yourself?
Four steps, in order, and none of them is a prediction.
- Measure it. Body divided by range. Decide which of the three categories it belongs to, or, most often, that it belongs to none of them.
- Locate it. What came before: a decline, a rise, a range, a level. A shape with no location has no meaning yet.
- Wait for the next close. The candle after is what settles whether the wick’s rejection held.
- Name the invalidation. The price that would make the read wrong. Write it down before the next candle prints, not after.
That last step is the habit that separates reading a chart from narrating one. The named patterns, bullish and bearish, are all built on the mechanics above, and the seven bullish patterns worth knowing shows each one with its context requirement and its invalidation stated the same way.
Sources
Every figure above was checked against these before publishing.
- StockCharts ChartSchool, Introduction to Candlesticks
- Wikipedia, Candlestick chart
- Bulkowski, Hammer (thepatternsite)
- Bulkowski, White Marubozu (thepatternsite)