Candlestick Chart
By Menno — 13 years in crypto, 3 bear markets survived, zero paid promotions
Last updated: March 2026
A candlestick chart displays price action using candlestick shapes that show the open, high, low, and close for each time period, with green candles indicating price rose and red candles indicating price fell.
Candlestick charts originated in 18th century Japan, developed by rice trader Munehisa Homma. Each candlestick represents one time period (a 1-hour candle shows one hour of trading; a daily candle shows one day) and contains four data points: the open (where price started), close (where it ended), high (highest point reached), and low (lowest point reached). The body of the candle is the range between open and close; the wicks (shadows) extend to the high and low.
A green (or white) candle means price closed higher than it opened — buyers won that period. A red (or black) candle means price closed lower — sellers won. The relative size of the body versus the wicks tells you something about conviction: a large body with small wicks indicates strong directional movement (buyers or sellers were in control throughout the period). Long wicks indicate price tested extreme levels but was rejected — the opposing force pushed it back.
Specific candlestick patterns carry interpretive weight. A "hammer" (small body with long lower wick) at a support level suggests selling was absorbed — bullish. A "shooting star" (small body with long upper wick) at resistance suggests buyers were rejected — bearish. A "doji" (body is almost nonexistent) indicates indecision. "Engulfing" patterns — where a large candle completely engulfs the previous candle's body — suggest a momentum shift. These patterns are most reliable on longer timeframes (4-hour, daily, weekly) and when occurring at significant support/resistance levels rather than in the middle of a trading range.
Frequently Asked Questions
What does a long upper wick on a candlestick mean?
A long upper wick means price rallied significantly during the period but sellers pushed it back down before the close. This is a bearish signal, especially when it occurs at resistance levels — it shows buyers lack the strength to sustain higher prices. The longer the wick relative to the body, the stronger the rejection.
What is the most bullish candlestick pattern?
The 'bullish engulfing' (a large green candle that completely engulfs the previous red candle's body) is one of the strongest single-bar reversal patterns, especially at support levels. The 'morning star' (a three-candle pattern: red candle, small indecision candle, large green candle) is also highly regarded as a reversal signal at bottoms.
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Related Terms
Support and Resistance
Support is a price level where buying pressure historically exceeds selling pressure, causing price to bounce. Resistance is a level where selling pressure exceeds buying, causing price to stall or reverse.
Order Book
An order book is a real-time list of all pending buy and sell orders for a trading pair on an exchange, showing the price and quantity of each order awaiting execution.
MACD (Moving Average Convergence Divergence)
MACD is a momentum indicator that measures the relationship between two exponential moving averages to identify trend direction, momentum changes, and potential buy/sell signals.
Bollinger Bands
Bollinger Bands are a volatility indicator consisting of a 20-period moving average with two bands plotted 2 standard deviations above and below, expanding in high volatility and contracting in low volatility.
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