Candlestick Basics

Introduction

Candlestick charts are the most popular chart type in the world. They were first used by Japanese rice traders centuries ago and today almost every trader uses them. Each candle tells a small story about the fight between buyers and sellers during a period of time.

The 4 Prices in Every Candle (OHLC)

• Open: the first traded price of the period.
• High: the highest price of the period.
• Low: the lowest price of the period.
• Close: the last traded price of the period.

On a daily chart, each candle represents one trading day.

Parts of a Candlestick

• Real body: the thick rectangle between the open and close.
• Upper shadow (wick): the thin line from the top of the body to the high.
• Lower shadow (wick): the thin line from the bottom of the body to the low.

Green and Red Candles

• Green (bullish) candle: close is higher than open. Buyers won the day.
• Red (bearish) candle: close is lower than open. Sellers won the day.

Some older charts use white for bullish and black for bearish. The meaning is the same.

Example: Reading One Candle

STU Ltd: Open Rs 100, High Rs 108, Low Rs 98, Close Rs 106.

• Close is above open, so it is a green candle.
• Real body: Rs 100 to Rs 106.
• Upper shadow: Rs 106 to Rs 108.
• Lower shadow: Rs 98 to Rs 100.
• Story: sellers pushed the price down to Rs 98 early, but buyers took control and closed it near the high. Bullish.

What Candle Shapes Tell You

• Long green body: strong buying pressure.
• Long red body: strong selling pressure.
• Small body: indecision. Neither side is in control.
• Long upper shadow: buyers tried to push higher but sellers pushed it back. Possible weakness.
• Long lower shadow: sellers tried to push lower but buyers pushed it back. Possible strength.

Marubozu Candle

A marubozu is a candle with a full body and almost no shadows. A green marubozu shows buyers were in control from open to close. A red marubozu shows complete seller control. These often appear at the start of strong moves.

Why Candlesticks Are Better for Swing Traders

• They show the direction of the day instantly by colour.
• They reveal the psychology of buyers and sellers through shadows.
• They form patterns that signal possible reversals, which is exactly what swing traders need.

The Most Important Rule

A single candle is not a trading signal on its own. Always read candles in context:

• What was the trend over the last 3 or more days?
• Is the candle near support or resistance?
• What is the volume?

Practice Exercise

Open any Nifty 50 stock chart. For the last 10 daily candles, write the colour, body size and shadow length. Then try to describe what happened between buyers and sellers each day.

On GoPocket

Open any stock on the GoPocket app, switch the chart to candlestick mode on the daily timeframe, and do the practice exercise above on stocks from your watchlist.

Frequently Asked Questions

Which timeframe is best for candlestick swing trading?

The daily chart. Use the weekly chart to understand the larger trend.

Are candlesticks enough to trade?

They work best combined with support, resistance, trend and volume.

Key Takeaways

• Every candle shows open, high, low and close.
• Green means buyers won, red means sellers won.
• Read candles in context, never alone.

Disclaimer: Educational example only.