Reading a Candlestick
Each candle compresses a period of trading into four prices. Learning to read the body and the wicks is the single highest-return skill in chart reading.
MadStockAlerts Research · Updated August 28, 2026
What to take away
- The candle body spans open to close; the candle wick spans the full high and low.
- A long wick marks a price that was reached and then rejected.
- Colour conventions differ between platforms; the geometry does not.
- One candle is a sentence, not a story. Context is the sequence around it.
- A candle discards the order in which the four prices occurred.
MAD Academy Training Video · 0:45
Four Numbers, One Shape
A candle encodes open, high, low and close in a shape you can read at a glance — and hides the order they happened in.
This lesson is part of a Stock Alerts + Tools plan.
The four prices
| Element | What it shows |
|---|---|
| Body | The distance between the open and the close |
| Body colour | Whether the close was above or below the open |
| Upper wick | How far above the body price traded before returning |
| Lower wick | How far below the body price traded before returning |
A candle summarising a whole day of trading discards the order in which those prices occurred. A long upper wick says price reached that level and did not hold it; it does not say whether that happened in the first ten minutes or the last.
That lost information is recoverable by dropping to a lower timeframe, which is one of the main reasons multi-timeframe analysis exists. The daily candle is a summary and the intraday chart is the transcript.
What the shapes describe
- Long body, short wicks: one side controlled the period from open to close.
- Small body, long wicks both sides: a contested period that resolved near where it began.
- Long lower wick, close near the high: selling was pushed back before the close.
- Long upper wick, close near the low: buying was met and reversed before the close.
- No body at all: the open and close were the same price, which is a doji.
The wick is where the information is. The body says where the period started and ended; the wick says which prices were tested and refused, and refused prices are how support and resistance form in the first place.
The relationship between body and wick is also a rough measure of conviction. A wide-range day that closes near its extreme says one side finished in control; the same range closing in the middle says the day was fought to a draw at a higher volume of disagreement.
The colour trap
Green-up and red-down is the common convention but is not universal, and the same platform can be configured either way. Hollow-and-filled candles encode the same thing without relying on colour, which is why they remain popular and are more accessible.
A more consequential subtlety: a candle can be green while closing well below the previous day's close. Green means the close beat this candle's own open, not that the day was up. Charts that colour by change from the prior close and charts that colour by open-to-close disagree, and both are in use.
This is not a trivial distinction on a gap day. A stock that gaps down five percent and then rallies through the session prints a large green candle on a day it lost money, and a reader scanning colour alone will draw exactly the wrong conclusion.
Aggregation is a choice
A daily candle is an aggregation of the intraday record. The same day rendered as sixty-five five-minute candles shows a sequence of events that the single daily candle summarises away.
Neither view is more correct; they answer different questions. The daily candle answers what the day amounted to; the intraday chart answers how it got there, and a trader who needs to know whether a level held at 10:30 cannot learn it from the summary.
Where the convention came from
Candlestick charting developed in Japanese rice markets and reached Western markets in the late twentieth century, arriving with a substantial vocabulary of named single-bar and multi-bar formations. The vocabulary is older than any of the statistical testing applied to it, which is worth knowing when weighing how much authority a name carries.
The representation itself is genuinely better than a bar chart for one specific purpose: seeing at a glance whether a session closed above or below where it opened, and how far the extremes ran beyond the body. That is a real gain in legibility and it is separate from any claim about what a particular shape predicts.
The named formations are a different matter. Attempts to test them systematically have generally found weak and inconsistent results, and the studies that report success are frequently sensitive to how the pattern is defined and to which market and period were used.
The distinction worth holding is between the encoding and the folklore. Four prices drawn as a body and two wicks is a good encoding of a session. That a particular arrangement of those four prices forecasts the next one is a separate claim requiring separate evidence.