Chart school · Lesson 2

Candlesticks

A candle shows four prices for one period of time: open, high, low and close. On a 1-hour chart, each candle is one hour.

Green candle: it closed higher than it opened, so buyers won that hour. Red candle: closed lower, sellers won. The wicks show prices that were reached but rejected.Teaching diagram, not real market data

What candles tell you

Big body, small wicks: one side was fully in control. Strong move.
Long wick: price went there, but the other side pushed it back. Rejection.
Small body, wicks both sides (doji): nobody won. Indecision.

Hammer: sellers pushed down, buyers pushed it all back, a possible turn up. Shooting star: the opposite at the top. Engulfing: a candle whose body covers the whole body before it, a sudden change of control.Teaching diagram, not real market data

Careful

Candle patterns alone are weak. We tested the hammer 192 different ways on 2 years of forex and gold data, and it lost money every way. A candle matters only at an important place: a liquidity level, a zone, or a fair value gap. You will learn those places next.

Timeframes

The same market can be shown with 1-minute, 15-minute, 1-hour, 4-hour or daily candles. Higher timeframes show the big picture. Lower timeframes show the details for entries. Lesson 12 shows how to use them together.

Quick check

A candle has a long lower wick and a small body at the top. What does the wick show?

Sellers pushed down, but buyers pushed price back upSellers won the periodNothing important

When does a candle pattern matter most?

Anywhere on the chartAt an important place: liquidity, a zone or an FVGOnly on Mondays