A candlestick chart is the most common way to show price on trading screens in India and around the world. Each candle sums up what happened during one period, which can be a minute, fifteen minutes, a day, a week or a month. Instead of one dot per period, as on a line chart, a candle shows four prices and lets you see at a glance who won the period: buyers or sellers.
The idea comes from Japanese rice traders in the 18th century and reached Western markets in the 1990s. Today the daily candlestick chart is usually the first thing a trader opens.
The four prices: open, high, low, close
- Open: the first traded price of the period. For a daily NSE candle, this comes from the opening session that ends at 09:15.
- High: the highest price traded during the period.
- Low: the lowest price traded during the period.
- Close: the last price of the period. For NSE stocks the official daily close is a weighted average of the last half-hour of trading, so it can differ slightly from the very last trade at 15:30.
Together these are called OHLC data. Every candlestick, bar chart and most indicators are built from them.
The parts of a candle
- Body: the thick rectangle between the open and the close.
- Upper wick (also called the upper shadow): the thin line from the top of the body up to the high.
- Lower wick (lower shadow): the thin line from the bottom of the body down to the low.
- Colour: green (or white or hollow) when the close is above the open; red (or black or filled) when the close is below the open.
For a green candle the open is at the bottom of the body and the close at the top. For a red candle it is the other way round. This is the one thing that confuses beginners most: the colour tells you the direction within the period, not compared with the previous day. A stock can open with a big gap down, rise all day, and print a green candle while still closing below yesterday's close.
A worked example
Say Reliance Industries has this day: open ₹1,400, high ₹1,425, low ₹1,392, close ₹1,418.
| Part | Calculation | Size |
|---|---|---|
| Body (green) | 1,418 − 1,400 | ₹18 |
| Upper wick | 1,425 − 1,418 | ₹7 |
| Lower wick | 1,400 − 1,392 | ₹8 |
| Full range | 1,425 − 1,392 | ₹33 |
Reading it: sellers pushed the price down to ₹1,392 at some point, buyers took it back and higher, up to ₹1,425, and the day closed near the top at ₹1,418. The body is more than half the range, so buyers were in control for most of the day. The candle does not tell you the order of events (whether the low came before the high); for that you need a shorter timeframe, such as the 15-minute chart.
What candle shapes tell you
| Shape | What it suggests |
|---|---|
| Long green body, small wicks | Buyers in control from open to close |
| Long red body, small wicks | Sellers in control from open to close |
| Small body, long wicks both sides | A tug of war with no winner: indecision |
| Long lower wick, small body near the top | Sellers pushed down but buyers rejected the lower prices |
| Long upper wick, small body near the bottom | Buyers pushed up but sellers rejected the higher prices |
| Almost no body | Open and close almost equal: a doji, pure indecision |
These shapes are the building blocks of the named patterns, such as the hammer, shooting star and engulfing candle. The candlestick patterns guide covers them one by one.
Live example: today's numbers for ICICI Bank
Every stock on ScreenerCharts has a daily candlestick chart on its technicals page. Here is ICICI Bank's latest price with its indicators:
The price and percentage change in the first row describe the latest daily candle: a positive change means it closed above yesterday's close, which is not the same as being a green candle. Open the technicals page and look at the last few candles: notice which have long wicks, and whether they formed near the moving averages or pivot levels listed in the box.
Timeframes: one candle can be a minute or a month
The same price data can be drawn at any timeframe. Five 1-minute candles combine into one 5-minute candle: its open is the first candle's open, its close the last candle's close, its high the highest high and its low the lowest low. A weekly candle sums up five daily candles in the same way.
- 1 to 5-minute candles: used by intraday traders, very noisy.
- 15-minute to 1-hour candles: intraday and short swing trades.
- Daily candles: the standard for swing trading and most indicators.
- Weekly and monthly candles: long-term trends and major levels.
A strong-looking red daily candle can be a small pullback on a weekly chart. Always know which timeframe you are reading; the timeframe guide helps you choose.
Candles, bars and line charts
- Line chart: joins the closing prices. Clean and simple, good for long-term trends, but hides the highs and lows.
- OHLC bar chart: the same four prices as a candle, drawn as a vertical line with small ticks for the open (left) and close (right). Harder to read at a glance.
- Candlestick chart: the same data with the body filled in and coloured, which makes the balance of buyers and sellers easier to see.
- Heikin Ashi: a smoothed type of candle using averaged prices. It makes trends look cleaner, but its candles are not the real open and close, so do not use it for exact levels.
Read candles with volume and context
A candle on its own says little. The same shape means different things in different places:
- A long lower wick at a known support level after a fall is more meaningful than the same wick in the middle of a range.
- A big green candle on twice the usual volume shows real buying; on thin volume it may just be a lack of sellers. The volume guide explains why.
- A gap between candles (one candle's low above the previous candle's high) shows overnight news or orders; see the gaps guide.
Common mistakes
- Confusing colour with daily change. Green means close above open, not close above yesterday.
- Reading an unfinished candle. A candle is not final until its period closes. A hammer at 14:00 can become a plain red candle by 15:30.
- Ignoring the timeframe. Patterns on 1-minute charts are far less reliable than on daily ones.
- Using unadjusted data. Splits and bonus issues create fake gaps unless the chart adjusts past prices.
Learning to read single candles is the foundation for everything else on a chart. Spend time looking at real charts on the heatmap and technicals pages, and ask of every candle: who won this period, and how convincingly?