Understanding Candlesticks
The Language of Price Action
Understanding Candlesticks: The Language of Price Action
Candlestick charts are the foundation of technical analysis. Every candle tells a story about the battle between buyers and sellers. Whether you're day trading, swing trading, or investing, understanding how candlesticks form is essential to interpreting market behavior.
🔹 Basic Candlestick Structure
A candlestick consists of four key price points:
1️⃣ Open – The price at which the candle begins.
2️⃣ Close – The price at which the candle ends.
3️⃣ High – The highest price reached during the candle’s time frame.
4️⃣ Low – The lowest price reached during the candle’s time frame.
The body of the candle represents the range between the open and close. The wicks (or shadows) show the high and low price movements.
✅ Bullish Candles (Blue in this example): Close is higher than the open → buyers in control.
❌ Bearish Candles (Orange in this example): Close is lower than the open → sellers in control.
🔹 The Story Behind Each Candle
Each candle tells us whether the buyers or sellers won that battle. But looking at one candle in isolation isn't enough. We must look at how they interact with previous candles to spot patterns and trends.
Example: A Trend in Motion
In the second image, you can see a clear downward trend forming:
1️⃣ The first bearish candle closes at the low. This signals strong selling pressure.
2️⃣ The next candle attempts to bounce but fails—a head fake designed to trap early buyers.
3️⃣ Once that bounce fails, sellers regain control, and the move accelerates downward.
4️⃣ Notice how each bearish candle continues closing at or near the lows—this is a sign of strong momentum.
🔹 Key Takeaways from This Price Action
📌 Closing at the lows often leads to continuation. If a bearish candle closes at the bottom with little to no wick, it suggests that sellers are in full control, and the next candle is likely to continue the move.
📌 False reversals happen. The early bounce attempt that failed was a classic trap—buyers thought the move was reversing, only to get stopped out as price snapped back down.
📌 Momentum builds as trends develop. Early in the move, price hesitated and attempted to reverse. But once lower highs formed, selling pressure intensified, leading to a bigger breakdown.
🔹 How to Use This in Your Trading
🔹 Identify whether a candle closes at the high or low—it reveals market sentiment.
🔹 Watch for failed reversals—a bounce that doesn’t hold often leads to stronger continuation in the original direction.
🔹 Pay attention to how each candle interacts with key support and resistance levels.
Candlesticks are real-time psychology of the market. Learning to read them will give you an edge in understanding price movement and executing trades with confidence.
💡 What’s your favorite candlestick pattern? Drop a comment! 🚀