How to read a candle
Four prices in one shape
Each candle covers one period, such as an hour or a day. The thick body runs from the opening price to the closing price. The thin wicks reach the highest and lowest prices traded in between.
Green closed higher, red closed lower
If the period ended above where it started, the candle is usually green; below, red. The colour says nothing about how far the price moved. The length of the body does.
A long wick is a price that didn't hold
A long lower wick means the price was pushed down and then bought back up before the close. It shows where trading happened briefly, not where the price settled.
Check yourself
A daily candle has a small body and a very long lower wick. What happened that day?
- The price fell sharply and stayed down
- The price dropped hard during the day but recovered most of it by the close
- Almost nobody traded
Show the answer
The price dropped hard during the day but recovered most of it by the close — The wick marks the low that was reached; the small body shows the day closed near where it opened. The drop happened, and then it was bought back.