What Is Candlestick Chart?

The body of each candle shows the range between the open and close prices, while the thin lines extending above and below the body (wicks or shadows) show the highest and lowest prices during the period. If the close is higher than the open, the candle is usually drawn in green (bullish), and if lower, in red (bearish). The same chart can be viewed across different time frames, from one minute to weekly.

The method's origins go back to price records kept in rice trading in Japan, and it became widespread in the West in the late 20th century. Technical analysts study patterns formed by single candles or groups of candles; doji (a candle where the open and close are nearly equal), hammer and engulfing patterns are among the best-known examples. These patterns can point to a shift in the balance between buyers and sellers.

Candlestick patterns do not produce reliable signals on their own; the same pattern can give different results in different market conditions and can be misleading, especially on lower time frames or with assets that have weak trading volume. For this reason, candlestick charts are generally evaluated together with trading volume, support and resistance levels and technical indicators.