How to read candlestick charts

To read a candlestick chart, look at each candle as a summary of one period: the body runs from the open to the close, and the thin wicks reach the highest and lowest prices traded. A green candle closed higher than it opened, a red one closed lower, and the shape of the body and wicks tells you whether buyers or sellers were in control.

Almost every crypto chart you will see is a candlestick chart, and every setup on this site is described in candles. Once you can read one candle, you can read a chart: it is the same idea repeated, one period after another.

What does a candlestick show?

Each candle covers one fixed slice of time, such as one hour or one day. Within that time, price moved around. The candle records four prices from that movement:

• Open: the first traded price of the period.
• High: the highest price reached.
• Low: the lowest price reached.
• Close: the last traded price of the period.

These are often shortened to OHLC. The thick part of the candle, the body, is drawn between the open and the close. The thin lines above and below, the wicks (also called shadows), stretch up to the high and down to the low.

Read as a story: price opened at $60,000, sellers pushed it down to $59,600, buyers took it all the way to $60,800, and some of that gain was given back before the hour ended at $60,500. Buyers won the hour, but not by as much as they could have.

What do green and red candles mean?

A green candle closed higher than it opened. Its open is at the bottom of the body and its close at the top. A red candle closed lower than it opened, so its open is at the top of the body and its close at the bottom. Some charts use hollow and filled candles or other colours instead, but the idea is the same.

The colour only compares the open and the close of that one candle. A green candle can still close below the previous candle's close if it opened lower. So the colour tells you who won the period, not whether price is going up overall. For that you look at many candles together: a run of higher highs and higher lows is an uptrend, lower highs and lower lows a downtrend. Moving averages explained shows a simple way to measure trend.

How do you read bodies and wicks?

The body: who was in control

A long body means price moved a long way from open to close and stayed there. One side was in control for the whole period. A long green body after a quiet stretch shows strong buying. A short body means the open and close were close together. Neither side won much, even if price moved a lot in between.

The wicks: where price was rejected

A wick shows a price that was reached but not held. A long lower wick means sellers pushed price down and buyers pushed it back up before the close. That is a sign of buying interest at the lower prices. A long upper wick means buyers pushed price up and sellers pushed it back down, a sign of selling interest higher up.

A useful habit is to compare the body with the whole candle. A candle that is mostly body is a decisive move. A candle that is mostly wick is a fight, and the side that won the close is the one with the shorter wick on its side.

What timeframe should you use?

The timeframe is how much time each candle covers. On a 15-minute chart, each candle is 15 minutes. On a daily chart, each candle is one day. The same market looks very different on each: a big red daily candle might be twenty calm hourly candles and one sharp drop.

• Higher timeframes (daily, weekly) show the bigger trend and the most important levels. Their candles move slowly and carry more weight.
• Lower timeframes (15-minute, 1-hour, 4-hour) show detail and are where most setups on this site are found. They have more noise, and fees take a bigger share of small moves.

A common approach is to read the trend on a higher timeframe, then look for an entry on a lower one. Time matters for trades too: the setups here close any open position after 32 candles, which is 8 hours on 15-minute candles and about 5 days on 4-hour candles. See managing a setup for why.

One rule applies on every timeframe: a candle is only finished when it closes. Until then the body and wicks can still change. A candle that looks like a perfect hammer with ten minutes to go can end as a plain red candle.

What are the most common candlestick patterns?

There are dozens of named patterns. You need very few. These four are the most useful, and they all describe the same thing: one side pushed, and the other side took control.

Doji

A doji has an open and close at almost the same price, so the body is a thin line, with wicks above, below or both. It means neither side won the period. After a strong move, a doji shows that the move has paused. It does not tell you which way price goes next.

Hammer

A hammer has a small body near the top of the candle and a long lower wick, usually at least twice the size of the body, with little or no upper wick. Sellers pushed price well down and buyers took almost all of it back. After a fall, at a support level, it can be an early sign that buyers are defending that price.

Shooting star

A shooting star is the mirror image of the hammer: a small body near the bottom of the candle and a long upper wick. Buyers pushed price up and sellers sent it back down. After a rise, at a resistance level, it can be an early sign of selling pressure.

Engulfing

An engulfing pattern uses two candles. In a bullish engulfing, a red candle is followed by a green one that opens at or below the red candle's close and closes above its open, so the green body covers the red body completely. Sellers had one period, and buyers took all of it back in the next. A bearish engulfing is the reverse: a green candle swallowed by a red one. The site has a full strategy built on it: bullish engulfing at a level.

Why do candlestick patterns only matter at a level?

Hammers, dojis and engulfing candles appear all the time, in the middle of ranges and during random noise. On their own they are unreliable. A hammer in the middle of nowhere tells you that some buyers showed up for one candle. A hammer at a support level that has held three times before tells you that buyers showed up exactly where they have shown up before. That is a much stronger story.

So read candles in this order: first find the level, then wait for price to reach it, then look at what the candles do there. A rejection wick or an engulfing candle at a real level is a reason to look closer. The same candle anywhere else is not. Learn how to find those levels in support and resistance.

Even at a level, a pattern is not a promise. It is a reason to plan a trade with a stop just past the level, sized so that being wrong costs a fixed, small amount. See how much to risk per trade and where to put a stop loss. If you are new to all of this, the crypto trading for beginners guide shows what to learn next.

Common mistakes

• Acting before the candle closes. A candle can change shape completely in its last minutes, so a signal that never closed is not a signal.
• Trading patterns away from a level. Without a level behind it, a pattern is mostly noise, and you will take many trades with no real reason.
• Reading one candle in isolation. A hammer in a strong downtrend is often followed by more selling, so check the trend and the candles before it.
• Ignoring the timeframe. A doji on a 5-minute chart carries far less weight than one on a daily chart, and treating them the same leads to overtrading.
• Memorising dozens of patterns. Most named patterns are variations of the same push and rejection, and learning more of them adds confusion rather than edge.

What to check

1. Has the candle closed? Wait for the close before judging the body and wicks. A pattern that only exists halfway through a candle does not count.
2. Which timeframe are you on? Know how much time each candle covers and check the higher timeframe too. A bullish 15-minute candle inside a falling daily trend is a weak signal.
3. Who won the period? Compare the open and close, and the size of the body against the whole candle. A long body is a decisive move. A small body with long wicks is a fight.
4. Where are the wicks pointing? A long lower wick shows buying below, a long upper wick shows selling above. Ask whether that rejection happened at a price that matters.
5. Is it at a level you marked in advance? Patterns at support or resistance deserve attention. The same pattern in the middle of a range usually does not.
6. Where would you be wrong? For a hammer or bullish engulfing at support, the stop belongs just below the low of the pattern, past the level. If that stop makes the trade too big or too small, skip it.

Nothing on this site is financial advice. Crypto is volatile, and candle patterns are a way to read what happened, not a forecast of what will happen next.