Candlestick Chart

What Is a Candlestick?

A candlestick is a way of displaying price movement for a stock, index, currency, or other tradable asset over a fixed time interval, such as one minute, one day, or one week. Each candlestick summarizes four prices for that interval: the open, the high, the low, and the close. Placed side by side, many candlesticks form a candlestick chart, which lets an investor see how prices have moved over time in a compact visual form.

How a Candlestick Is Drawn

Each candlestick has two main parts. The thick middle section is called the body, and it spans the range between the opening and closing prices. The thin lines extending above and below the body are called wicks or shadows. The upper wick reaches the highest price traded during the period, and the lower wick reaches the lowest price.

The color of the body usually signals the direction of the period. A green or white body typically means the close was higher than the open, which is a rising period. A red or black body typically means the close was lower than the open, which is a falling period. Some charting platforms let users choose their own colors, so it is worth checking the legend before reading a chart.

Reading the Pattern

Candlesticks are often read to understand the tug-of-war between buyers and sellers. A long body with short wicks suggests that one side dominated for most of the period. Long wicks indicate that prices moved sharply in one direction before being pushed back, which can signal uncertainty or a reversal in sentiment.

Traders have given names to many common shapes, such as the doji, where the open and close are nearly equal, and the hammer, which has a small body near the top and a long lower wick. These patterns are widely discussed in technical analysis, though their predictive value is debated. Candlesticks show what has already happened and do not guarantee what will happen next.

Why It Matters to Investors

Candlestick charts give a richer view of each period than a simple line chart that shows only closing prices. They are especially common in technical analysis and are supported by nearly every charting tool and brokerage platform. Investors who use them should pair the visual reading with other information, such as trading volume, company fundamentals, and broader market conditions, rather than relying on shapes alone.