Field Guide to Trading Terms

Candlestick

Family VI · Charts & indicators

Not to be confused with candlestick pattern, engulfing candlestick pattern, hammer candlestick.

Candlestick is the basic price symbol of candlestick charting, a method developed in Japan and now used across most trading platforms. Each candlestick represents one time interval — a minute, an hour, a day, a week — and encodes four prices: open, high, low and close. The shape and colour of the body show where the interval opened and closed relative to each other, while the wicks show the extremes reached during the interval.

Reading a candlestick

The rectangular body spans the distance between the interval's opening price and its closing price. If the close is above the open, the body is often drawn hollow or in one colour (commonly green or white); if the close is below the open, it is filled or drawn in another colour (commonly red or black). The thin lines above and below the body, called wicks or shadows, mark the highest and lowest prices traded during the interval.

A long body indicates strong directional movement; a short body indicates little net change. A long upper wick shows that price rose but was pushed back down before the close, and a long lower wick shows the opposite. These readings are relative to the instrument and timeframe and are not fixed thresholds.

Worked example

Suppose a stock trades on a daily chart with the following prices for one day: open 100.00, high 104.50, low 99.20, close 103.80.

Daily candlestick from four prices
Bodyclose − open = 103.80 − 100.003.80 (bullish, close above open)
Upper wickhigh − close = 104.50 − 103.800.70
Lower wickopen − low = 100.00 − 99.200.80
Rangehigh − low = 104.50 − 99.205.30

The body is the dominant feature, so the interval is read as a strong up day with modest wicks on both sides.

Timeframes and construction

The same four prices can be aggregated into longer intervals: four 15-minute candlesticks combine into one 1-hour candlestick using the first open, the last close, and the highest high and lowest low of the four. Because of this, a candlestick is not a fixed unit of time but a container for whatever interval the chart is set to. Charts may also be built from tick counts or volume rather than clock time, depending on the platform.

Often confused with

candlestick pattern
A candlestick is the single symbol for one interval, whereas a candlestick pattern is a named configuration of one or more candlesticks, such as a doji or a three-white-soldiers formation; the visible sign is that a pattern spans two or more candles or carries a specific name.
engulfing candlestick pattern
An engulfing candlestick pattern is a specific two-candle formation in which the second body completely covers the first, while a candlestick is any single interval symbol; the visible sign is a pair of candles where one body overlaps the other entirely.
hammer candlestick
A hammer candlestick is a single candle with a small body at the top and a long lower wick, a named shape that may signal a reversal, whereas a candlestick is the general symbol regardless of shape; the visible sign is a lower wick at least twice the body length with little or no upper wick.

See also

Family: VI · Charts & indicators · Index A–Z