Candlestick Pattern Basics

• Tweet

You already learnt what candlestick charts are so now it’s time to learn what candles actually are, and how to use candle patterns to your advantage. Reading candlesticks can reveal to you a lot of very useful information, about the market. This information can make you a lot of pips.

First you need to learn how to read the information provided by a candle. So here is a quick glossary:

Bullish Candle – In financial markets, the term bullish refers to any long move. You already learnt that going long or taking a long position means buying, and expecting the rate to go up. A bullish candle is a long candle that forms when the price goes up.

Bearish Candle – In financial markets, the term bearish refers to any short (sell) move. Bearish candles form when the price moves down.

Body – The candle body is the space between the open and the close of the candle. If the body is white it means the candle closed higher than it opened. If it is red it means it closed lower than it opened.

example 1: You’re watching a EUR/USD 1hr chart. The price opens at 1.4200 and moves up 100 pips to close at 1.4300 giving you a bullish (white) body.

example 2: You’re watching a EUR/USD 1hr chart. The price opens at 1.4200 and moves down 100 pips to close at 1.4100 giving you a bearish (red) body.

wicks (or shadows) – Some people call wicks shadows. It makes sense to call them wicks though since candles have wicks and everybody calls them candles! The upper/lower wicks represent the highest/lowest points the candle reached during the time it was open.

What You’ve Learned About Candle Basics so Far

• There are different timeframe charts from a tick (1 second) to monthly charts.
• Bullish candles form when the rate moves up. If you take a long position you want to see bullish candles.
• Bearish candles form when the rate moves down. If you take a short position you want to see bearish candles.
• Candles consist of a body which shows the amount of pips between the open and close price and wicks which show the highest and lowest price reached.
• Candles open and close based on the timeframe of the chart you’re looking at. So on a 4 hour chart a new candle opens every 4 hours.

These are the bare basics of candle patterns. Now it’s time to get a more in-depth understanding of candles.