Candlestick Charts

Each candlestick has a body (the rectangle between the open and close) and two wicks (or shadows) extending to the period's high and low. A green (or white) candle means the close was higher than the open — a bullish period. A red (or black) candle means the close was lower — a bearish period.

Candlestick patterns attempt to identify buyer and seller sentiment from the shape of individual candles or small groups. A Doji, where the open and close are almost equal, signals indecision. A Hammer — a small body with a long lower wick — can signal reversal of a downtrend when it appears at a support level.

Common multi-candle patterns include Engulfing (a large candle fully envelops the previous one, potentially signalling a trend reversal), Morning Star and Evening Star (three-candle reversal signals), and Inside Bars (a candle contained within the previous candle's range, often signalling a pause before continuation).

Candlestick patterns are most reliable when combined with other tools such as support/resistance levels, volume analysis, and moving averages. Patterns alone, without context, produce false signals frequently.

Candlestick charting originated in Japanese rice markets in the 18th century and was popularised in Western trading by Steve Nison in the early 1990s. Today it is the dominant chart type on most trading platforms.