The Japanese candlestick chart is the most popular visual tool among traders, and for good reason: at a single glance it summarises all the price activity within a period of time. It was born centuries ago among Japanese rice merchants and today it is the standard on platforms like MetaTrader 5. Mastering how to read it is the first step in technical analysis.
Each candle represents a specific time interval —one minute, one hour, one day— depending on the timeframe you choose. And each candle contains four key pieces of data: the opening price, the closing price, and the high and low reached in that period. The “body” of the candle is the rectangle between the open and the close; the “wicks” or “shadows” are the thin lines extending towards the high and the low.
The colour indicates direction. A bullish candle (usually green or white) forms when the close is above the open: buyers dominated. A bearish candle (red or black) appears when the close ends below the open: sellers were in charge. A large body reflects a decisive move; a small body reflects indecision or a balance between the two sides.
The wicks tell a story just as important as the body. A long upper wick shows that the price rose but was rejected and came back down, a sign of selling pressure in that zone. A long lower wick shows the opposite: the price fell but buyers pushed it back up. Learning to read the wicks helps you sense where the market’s strength lies.
From combinations of candles come patterns that many traders watch. The “hammer” is a small-bodied candle with a long lower wick after a decline, and it suggests a possible turn to the upside. The “shooting star” is its mirror image: a small body and a long upper wick after a rise, a sign of a possible turn to the downside. The “doji”, with nearly identical open and close, reflects indecision and often precedes a change of direction.
There are also two- and three-candle patterns. The “bullish engulfing” occurs when a large green candle completely engulfs the previous red one, indicating that buyers have taken control. The “bearish engulfing” is the opposite. These patterns gain reliability when they appear at relevant areas of the chart, such as a support or a resistance, and they should never be interpreted in isolation.
One key warning: no candlestick pattern guarantees anything on its own. They are clues about probability, not certainties. Experienced traders combine them with other elements —the overall trend, support and resistance levels, volume, and indicators— to confirm their decisions. The candle tells you what is happening; the context tells you whether it is worth acting on.
The best way to learn is to practise. Open a candlestick chart on your platform, choose a major pair like EUR/USD, and watch how the candles form in real time. Switch timeframes, identify hammers and dojis, and check what happened next. Over time, reading candles will stop being a conscious exercise and become an intuition that guides your trades.
Sources: Bank for International Settlements (BIS), central banks, official MetaQuotes (MetaTrader 5) documentation and regulatory bodies.
