How a Candlestick Is Built
Open, high, low and close, and what a single candle actually records.
Overview
A candlestick summarises everything that happened to price during one fixed period of time. Whether that period is one minute or one week, every candle records the same four values.
- Open: The first traded price of the period
- High: The highest price reached during the period
- Low: The lowest price reached during the period
- Close: The final traded price of the period
Body and Wicks
The thick rectangle is the body. It spans the distance between the open and the close, and it tells you where price finished relative to where it started.
The thin lines above and below are the wicks, sometimes called shadows or tails. They span the full range price travelled before settling back, showing you territory that was tested and then given up.
Bullish and Bearish Candles
A candle that closes above its open is bullish and is usually drawn green or hollow. A candle that closes below its open is bearish and is usually drawn red or filled.
Colour alone says very little. A small green candle after a large red one is not a reversal. The relationship between the body, the wicks and the surrounding candles is what carries information.
What a Candle Does Not Tell You
A candlestick records the open, high, low and close, but not the order in which they occurred. A candle with wicks on both ends might have risen first and then fallen, or fallen first and then risen. The chart cannot distinguish between the two.
This matters more on higher timeframes, where a single candle can compress hours or days of activity into one shape. Dropping to a lower timeframe is the only way to see the sequence inside it.
Why the Close Matters Most
Many traders treat the close as the most significant of the four values. Intraday, price can trade through a level repeatedly, but the close is where the market settled once the period ended.
This is why a level is usually considered broken only on a candle close beyond it, rather than on a wick that pierced it briefly.
Psychology Behind the Candle
Each candle is a record of a negotiation between buyers and sellers. A long body means one side dominated for the whole period. A small body means neither side achieved much, and the market ended roughly where it began.
Long wicks show prices that were reached and then rejected, indicating that traders were unwilling to sustain business at those levels.
Weaknesses & Limitations
- A single candle in isolation carries very little information
- The sequence of movement within a candle is hidden
- Candle boundaries are arbitrary and depend on your chart timezone
- Very low timeframes produce candles dominated by noise
Example Use
A trader watching a level may ignore a wick that pierces it and instead wait for a candle to close beyond the level before treating it as broken. The candle close becomes the decision point, and the wick becomes context rather than a signal.
Risk Management Notes
Reading candles is descriptive, not predictive. A candle tells you what has already happened, not what will happen next. Always combine candle reading with market structure, levels and a defined invalidation point before acting.