What Is a Candlestick? How Do You Read One?

The participants with enough capital to move markets are usually institutions, market makers, large holders, arbitrageurs, and other major professional investors.

Retail traders often learn about important events from the news after the fact. Larger participants usually have their own information networks, quantitative models, and trading systems, so they can react much faster.

Wars, policy decisions, public statements, earnings reports, and economic data all influence how these participants value an asset. They express those views by committing real money to buy or sell.

Think of each trade as a vote. As those votes arrive, the price moves up and down.

A candlestick organizes that process into a visual snapshot of a specific period.

You can change the chart timeframe to summarize a day, an hour, a minute, or another interval. Each candlestick records four essential prices: open, close, high, and low.

The price may take a complicated path during that interval:

The candlestick compresses that entire path into one bar, making it easier to see whether buyers or sellers controlled the period.

Traders compare multiple candlesticks and apply price-action or technical analysis to judge which side is stronger, which direction is more likely to continue, and whether a long or short position makes more sense.

How to Read a Candlestick?

• Wicks: The top and bottom mark the highest and lowest prices reached during the period.
• Body: The two ends mark the opening and closing prices.

The open and close switch positions depending on whether the candlestick closed higher or lower.
An up candle is also called a bullish candle, while a down candle is also called a bearish candle.

Key Takeaways

A candlestick organizes price and time into a record of the market's buying and selling.
Traders compare multiple candlesticks to judge which side is stronger before choosing long or short.
With these basics in place, the next lesson can explain why long and short trading often involves perpetual futures.