Lessons › Candlesticks › What one candle tells you
World 1 · Candlesticks · lesson 1 · level 1
What one candle tells you
Every candle shows four prices: where it started, its highest, its lowest and where it finished.
In one line
One candle holds four prices and a whole story. Can you read all four?
Explained simply
Think of a candle as a tiny report card for one hour or one day of prices. It shows where price started, how high it went, how low it went and where it finished. The thick part is the body, and the thin lines are the wicks.
The lesson
A candlestick shows price over one period, such as an hour or a day. The body runs from the open to the close, and the wicks reach the highest and lowest prices of the period. A green candle closed above its own open, and a red candle closed below its own open. Together these four prices are called OHLC: open, high, low and close.
A worked example
Illustrative example: a share opens the day at 100, rises to 112, falls to 96 and closes at 108. The candle is green because 108 is above 100. The body is 8 tall (100 to 108), the upper wick is 4 (108 to 112), the lower wick is 4 (96 to 100), and the whole range is 16 (96 to 112).
The same idea at four levels
- Beginner. Every candle shows four prices: open, high, low and close.
- Foundation. The body runs between the open and the close, and the wicks reach the high and the low.
- Intermediate. Green means the close is above this candle's own open and red means it is below, no matter what happened the day before.
- Advanced. The same four prices can come from very different paths inside the period, so a candle records the result of a fight, not every move in it.
- Expert. Traders read a candle together with the candles around it and its timeframe, because one candle is a record of the past, not a forecast.
Mistakes to avoid
- Thinking the tips of the wicks are the open and the close.
- Assuming a green candle means price is higher than the day before, when it only means this candle closed above its own open.
- Forgetting to check the timeframe, since one candle can cover a minute or a whole week.
Check yourself
What four prices does every candle show?
Open, high, low and close. These four prices are called OHLC.
What does the body of a candle show?
The distance between the open and the close. The body runs from the open to the close.
What do the wicks show?
The highest and lowest prices of the period. The wicks reach the extremes of the period.
What does a green candle mean?
It closed above its own open. Color compares the close with this candle's own open.
A candle opens at 50 and closes at 45. What color is it?
Red. The close is below the open, so the candle is red.
Goal of this lesson: Read the open, high, low and close from a single candlestick.