What is a candlestick chart? How to read candles, step by step
A candlestick chart is a price chart where each candle shows four prices for one period of time: the open, the high, the low and the close. Reading candles helps you see how price behaved in the past, but it is not a reliable prediction and not a signal to buy or sell. This guide explains what a candle shows, how timeframes work, a few well-known patterns and the mistakes beginners make most.
What is a candlestick chart?
A candlestick chart is a way of drawing price history in which every candle sums up one period, such as one hour or one day. Instead of a single dot per period, as on a line chart, each candle shows where the price started, how far it went up and down, and where it ended.
The format is old and widely used for coins, stocks, gold and currencies alike. It is popular because it packs more information into the same space and makes the range of each period easy to see at a glance.
What does a single candle show? Open, high, low and close
Every candle is built from four prices, often shortened to OHLC. The thick part is the body and the thin lines above and below are the wicks, also called shadows.
Colour tells you the direction. On most charts a green (or hollow) candle means the period closed higher than it opened, and a red (or filled) candle means it closed lower. Some charts let you change these colours, so always check the legend.
- Open: the first traded price of the period.
- Close: the last traded price of the period.
- Body: the area between open and close.
- High: the top of the upper wick, the highest price reached.
- Low: the bottom of the lower wick, the lowest price reached.
Candlestick timeframes: from 1 minute to 1 week
The timeframe is the length of time each candle covers. On a 1-minute chart one candle is one minute of trading; on a daily chart one candle is a whole day; on a weekly chart it is a full week. Common choices are 1 minute, 5 minutes, 15 minutes, 1 hour, 4 hours, 1 day and 1 week.
The same market can look calm on a weekly chart and chaotic on a 1-minute chart. Short timeframes are full of random noise, while longer ones show the broader path of price. Beginners usually learn more from daily and weekly candles than from minute-by-minute ones.
How to read candlestick charts: one candle at a time
To read a candle, look at three things: the colour, the size of the body and the length of the wicks. A long green body means buyers pushed the price up steadily during that period; a long red body means the opposite happened.
Long wicks show that price travelled far but was pushed back before the period closed. A long lower wick, for example, means the price fell during the period and then recovered part of the drop. A tiny body with long wicks means the period ended close to where it started, after a lot of back and forth.
A single candle only describes what already happened in one period. It says nothing certain about the next one, so always read it together with the candles around it and the bigger picture.
Candlestick patterns for beginners: doji, hammer and engulfing
Traders give names to candle shapes that appear often. Knowing the names helps you follow what others are talking about, but these patterns fail often and are not reliable buy or sell signals. They describe past price behaviour and, at most, shift probabilities slightly.
Here are three of the best-known patterns, described neutrally:
- Doji: the open and close are almost equal, so the body is a thin line. It shows indecision: neither side won that period.
- Hammer: a small body near the top with a long lower wick. Price fell during the period and then recovered most of the drop.
- Engulfing: a candle whose body completely covers the previous candle's body in the opposite colour. It shows a strong change of direction within those two periods.
Why volume matters next to candles
Volume is the amount traded in each period, usually shown as bars under the candles. It adds context: a big candle on high volume reflects much more trading activity than the same candle on very low volume. Volume is not the same as market cap, which is the price multiplied by the circulating supply.
On thinly traded coins, a few orders can create long candles and wicks that mean little. That is why liquidity, how easily an asset can be bought or sold without moving its price, matters when you read any chart. Some people also look at indicators such as RSI, which bring their own limits.
Line chart vs candlestick chart: which one do you need?
A line chart connects one price per period, usually the close, into a single line. A candlestick chart shows the full range of each period. Neither is better in general; they answer different questions.
If you only want to know whether a coin is higher or lower than last week, a line chart is enough and easier to read. If you are studying how price moved within each period, candles give more detail.
| Feature | Line chart | Candlestick chart |
|---|---|---|
| Data per period | One price, usually the close | Open, high, low and close |
| Shows the range of each period | No | Yes, through the wicks |
| Shows direction of each period | Only indirectly | Yes, through the colour |
| Ease of reading | Very easy | Needs some practice |
| Best for | A quick look at the trend | Studying price behaviour in detail |
Common beginner mistakes when reading candles
Most mistakes come from expecting candles to say more than they can:
- Reading one candle in isolation and treating it as a sign of what comes next.
- Living on tiny timeframes such as 1 minute, where most moves are noise.
- Ignoring news, events and liquidity, which can override any chart shape in seconds.
- Treating a named pattern as a signal to buy or sell instead of a description of the past.
- Watching charts all day and making rushed decisions out of fatigue or fear.
Candles, line charts and price alerts in Waletifi
Waletifi is a wallet, not a trading platform, and it does not offer leverage or futures. The app's Market tab and the site's price pages show live prices with the 24-hour change and line charts for a quick view: the price pages have a 7-day chart, and the gold screen has daily to yearly charts. Waletifi does not show candlestick charts or indicators; for deeper candle study you would use a separate charting tool.
If you just want to know when a price matters to you, you do not need to stare at candles. The app can notify you when an asset reaches a price you chose, or moves by a set percentage within 24 hours, where price alerts are enabled.
