Get the app
Lesson 2 · 8 min

Reading candles

Every candle tells you four prices. Read them, and a chart stops being noise.

  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
  6. 6
  7. 7
  8. 8
  9. 9
  10. 10
  11. 11
  12. 12
Step 1

One candle, four prices

Every candle covers one period of time and records four prices: open (the first price), close (the last), high and low. On a green candle the close is above the open, so the price ended higher. On a red one the close is below the open.
HighCloseOpenLowGREEN: UPHighOpenCloseLowRED: DOWN
The thick part (the body) runs from open to close. The thin lines (the wicks) reach the highest and the lowest price.
Step 2

The body shows strength

Look at the size of the body. A long body means the price travelled far from open to close: one side pushed hard. A small body means a fight that nobody won, which often comes before a change.
  1. A long green body: buyers were in control the whole time.
  2. A tiny body: the price ended about where it started. Neither side won.
  3. A long red body: sellers were in control.
4,1004,1204,1404,160123
Step 3

The wicks show the fight

A wick is a price that was reached and then rejected. The longer the wick, the harder the push back. Long wicks at a support or resistance level from lesson 4 are some of the clearest signals a chart gives.
  1. Sellers pushed the price far down, then buyers pushed it all the way back. A long lower wick says buyers stepped in.
  2. Buyers pushed the price far up, then sellers pushed it back. A long upper wick says sellers stepped in.
4,1004,15012
Step 4

A timeframe is the size of a candle

The timeframe is how much time one candle covers: 5m is five minutes, 1h one hour, 4h four hours, 1d one day. Small candles join into big ones. Four 15 minute candles make exactly one 1 hour candle.

FOUR 15 MINUTE CANDLES

ONE 1 HOUR CANDLE

Same 60 minutes. The hour candle opens where the first quarter opened, closes where the last one closed, and reaches the highest and lowest of all four.
Step 5

Same market, different story

Because each timeframe shows a different amount of history, the same market can look like it is falling on one chart and rising on another. Neither is wrong. Always know which timeframe you are looking at, and check a bigger one before you decide. Lesson 5 turns this into a routine.

1 HOUR: FALLING

1 DAY: RISING

Same gold, same moment. The hour chart shows one bad day; the daily chart shows months of rising prices.
Step 6

Two prices, and the gap between them

A broker always quotes two prices: one to buy at and a slightly lower one to sell at. The gap is the spread, and it is a cost: buy and sell straight away and you lose it. It is usually small, but it widens at night and around big news. AiTradely shows one market price; your broker shows both.
SELL4,125.20
SPREAD
0.40
BUY4,125.60
At a broker you buy at the higher price and sell at the lower one. The gap is the spread.

Watch out. A candle describes the past. A big green candle does not mean the next one will be green: it only tells you who was stronger while it formed.

Words

New words in this lesson

Candle
One period of price, drawn as a body and two wicks.
Open and close
The first and the last price of the candle.
High and low
The highest and the lowest price reached during the candle.
Body
The thick part, from open to close. Long means a strong move.
Wick
The thin line: a price that was reached, then pushed back.
Timeframe
How much time one candle covers: 5m, 1h, 4h, 1d.
Spread
The gap between the buy and the sell price. A cost on every trade.
Check yourself

Test yourself

6 questions, 3 of them on a chart. Tap an answer to see right away if it is correct and why. You pass with 5 of 6; retry any time.

1Which candle closed higher than it opened?
ABC
2On this red candle, which point is the close?
ABC
3On the 4h chart, one candle covers:
4Which candle shows buyers pushing back hard after a fall?
ABC
5What is the spread?
6A huge green candle just closed. What does it tell you?
AI readLet the AI read the candles for youIt reads the latest candles of any market and tells you in plain words who is in control, buyers or sellers.
Start in your browser
QR code for the AiTradely appPrefer your phone?Scan to get the app
4.9App Store4.2Trustpilot

Risk warning. Trading financial markets involves a high risk of loss and is not suitable for everyone. This course is education, not financial, investment or tax advice. The charts are drawn examples, not real prices or predictions. Past behaviour of a market does not guarantee what it does next. You make your own trading decisions.