How to Read a Candlestick Chart, One Bar at a Time
Key takeaway
- One candle is one slice of time and four prices: where it opened, where it closed, and the highest and lowest it reached in between. You choose how long the slice is.
- The body is open to close. The wicks are how far the price got and did not stay. Colour only says whether the close was above or below the open.
- A volume bar's colour is copied from the candle above it and carries no information of its own — one of the most common things beginners read into a chart that is not there.
Learning pathRead a price chart from scratchStep 1 of 11
Based on a clip by StocksToTrade (@Stockstotrade) — YouTube
One candle is one slice of time
A candle is not a moment. It is a period you chose, squeezed into one shape.
The video's framing is the right one to start from: “every candlestick is a snapshot in time. That could be one minute, could be five minutes, could be an hour, could be the daily chart.” Change the setting and every candle on the screen is redrawn — same market, different picture.
Which slice to pick is its own decision, and it is covered in start on the slow chart. For learning to read a bar, use a daily chart: one candle is one day, which is easy to hold in your head.
The body and the wicks
The body is where the period started and finished. The wicks are everywhere it went and left.
- Long body — the price moved in one direction and stayed there.
- Long wick — it went that far and came back. Somebody on the other side pushed it back.
- Small body, long wicks on both sides — a lot of movement and no conclusion. This shape is usually called a doji.
What the colour does and does not say
Colour is one comparison only: close against open. Nothing else.
Why not just use a line chart?
A line chart draws the closes and throws away everything that happened between them.
The video overstates this in one direction — it calls line charts unusable for short-term trading, which is fair, and then concedes the other half: “if you are a long-term investor, like if you're buying a stock and holding it for months or years, use line charts, I don't care.” That concession is the accurate part. The detail in a candle is worth having when the detail affects a decision you are about to make.
The volume bars underneath are not a second signal
Their height is information. Their colour is decoration.
The mistake is specific and common. The video names it directly: “Sometimes people say, oh, it's red volume, I shouldn't buy, or it's green volume, it's a good thing. The volume candles are going to simply follow the price action candle.” The colour is copied down from the bar above it. It adds nothing.
What a candle cannot tell you
The order of events inside the bar is gone. Four prices survive; the sequence does not.
A candle with a long lower wick could have dropped first and recovered, or risen, collapsed and clawed back. Those are different stories and they produce the same drawing. Anything you are told a single candle proves about who was in control is a reading, not a measurement — which is why four candlestick patterns and the condition they all need spends most of its length on the condition rather than the shapes.
Try this week
- Open a daily chart of something you know and set it to candles. Identify the open, close, high and low on one bar.
- Find a candle with a long lower wick and write down two different stories that would produce it.
- Switch the same chart to a line chart and back, and note what disappeared.
- Look at the volume bars and confirm for yourself that their colour matches the candle above, every time.
Common questions
What do the four parts of a candlestick mean?
The body spans the opening and closing price for that period, and the two thin wicks reach the highest and lowest prices traded within it. On a rising candle the open is the bottom of the body and the close is the top; on a falling candle it is reversed.
What does a long wick on a candlestick mean?
That the price reached that level and did not hold it — buyers or sellers pushed it back before the period ended. It shows rejection of a price, but it does not tell you when in the period it happened or what happens next.
Is a green candle a buy signal?
No. Green only means the period closed above where it opened. A candle can close green on a day the stock is far below last week's level, so on its own the colour is a description of one period, not a signal about the next.
Why is my volume bar red, and does it matter?
It is red because the price candle above it is red — the colour is copied, not calculated. The useful information in a volume bar is its height relative to the bars around it, which tells you how many shares changed hands.
Should beginners use candlestick charts or line charts?
Use candles once you are making decisions that depend on what happened inside a period, which is any kind of trading. If you are buying a broad fund monthly and holding for years, a line chart is genuinely enough — the extra detail is not feeding any decision you make.