What one candle actually tells you

A single candle is a compressed story about one period of trading. Four numbers, a body, two wicks. Most of chart reading is learning to decompress that story quickly. This lesson walks through it slowly so that later it becomes automatic.

Four numbers, one story

Take this five-minute candle:

Read it as a sequence of events. The period started at 50.00. At some point price was as low as 49.90, so sellers briefly pushed it down ten cents. At some point it was as high as 50.60, so buyers pushed it up sixty cents. It ended at 50.55, which is near the high. The body runs from 50.00 to 50.55, so it is a green candle with a big body. The upper wick is only five cents, and the lower wick is ten cents.

 50.60  |
 50.55 +-+  close
       | |
       | |  body: buyers won by 0.55
       | |
 50.00 +-+  open
 49.90  |

The story: buyers were in control for nearly the whole period, sellers barely made a dent, and the period ended with buyers still pressing. Whoever sold during this candle is now underwater.

Body: who won and by how much

The body is the net result. Open to close. A big body means one side dominated. A tiny body means the period ended roughly where it began, regardless of what happened in between.

Body size is only meaningful relative to recent candles. A one-dollar body is huge on a stock that usually moves twenty cents in five minutes and irrelevant on one that usually moves three dollars. Always compare a candle to its neighbours, not to some fixed number.

Wicks: who tried and failed

A wick is a place price went and could not stay. A long upper wick means buyers pushed price up and then sellers pushed it all the way back down before the period closed. A long lower wick means the reverse.

Think about the people who traded at the tip of a long wick. Someone bought at the very top of a long upper wick. By the close they are losing. If many people did that, there is now a group of trapped buyers at that price who would love to get out at breakeven. That matters later in the course when we talk about why levels form.

      |  <- buyers reached here and were rejected
      |
      |
    +---+
    |###|  small body: little net progress
    +---+
      |

Close relative to range

The most useful single question about a candle: where did it close within its own range? A close near the high means buyers were in control at the end of the period, which is the moment that carries into the next candle. A close near the low means sellers were. A close in the middle means nobody had the upper hand when the bell rang.

You can put a number on this. Take (close minus low) divided by (high minus low). For the candle above: (50.55 - 49.90) / (50.60 - 49.90) = 0.65 / 0.70 = about 0.93. That is a close in the top 7% of the range. Strong. You do not need to calculate this in real time; you just need to glance and see "closed near the top."

Key idea: Body says who won and by how much. Wicks say who tried and got rejected. Where the close sits within the range says who had control at the end. Read every candle in that order.

Reading a few in a row

Here are four consecutive daily candles for an imaginary stock:

Sketched:

 22.10        |
 21.40    |  +-+   |
 21.30  +-+  | |  +-+
 21.00 +-+|  | |  |#|
       | || +-+  |#|
       | ||  |   |#|
 20.00 +-+|      |#|
 19.90  | |      +-+
       Mon Tue Wed Thu

Nothing in this sequence is a named pattern yet, and you do not need names. You can already tell the story: two days of buyers winning, a day where buyers ran out of steam at 22.10, then sellers taking control. Anyone who bought near 22 on Wednesday is trapped. Anyone who bought on Monday still has a profit but watched most of it disappear.

What a candle cannot tell you

A candle does not tell you the order in which the high and low happened. The Wednesday candle could have spiked to 22.10 in the first minute and drifted down all day, or it could have chopped around and spiked at the end. Those are different stories, and to see them you would drop to a lower timeframe, which is the subject of the next lesson.

A candle also does not tell you how many shares or contracts traded. That is volume, which sits in its own panel under the chart and gets its own module.

Try it: Take any daily chart and pick five candles at random. For each one, say out loud: body size relative to neighbours, which wick is longer, and where the close sits in the range. Then say one sentence about who is trapped. Do this until it takes under three seconds per candle.

Recap

• One candle is four numbers: open, high, low, close. Read them as a sequence of events.
• The body is the net result of the period. Judge its size relative to neighbouring candles.
• Wicks show where price went and was rejected; traders who bought or sold at the tip are now trapped.
• Close position within the range shows who had control at the end.
• A candle cannot show the order of the high and low, or how much traded. Lower timeframes and volume fill those gaps.