How to read a candlestick chart (with a candle you can build)

CA Vaibhav Sandipan Mote, SEBI Registered Research Analyst (INH000019895) 12 November 2026 8 min read

Open any chart app and the default view is candlesticks. They look busy at first, but every candle answers the same four questions about one period of trading: Where did it start? How high did it go? How low did it go? Where did it end?

Once you can read one candle, you can read all of them. The fastest way to learn is to build one yourself, so let's do that.

The anatomy of a candle

Open: the first traded price of the period.
Close: the last traded price of the period.
Body: the thick part, from open to close. Green (or hollow) if close is above open, red (or filled) if close is below.
Upper wick: the thin line above the body, up to the highest price.
Lower wick: the thin line below the body, down to the lowest price.

Build a candle

A stock in one session. Move the four prices and the candle tells you the story of that session.

Open ₹1,000 High ₹1,060 Low ₹990 Close ₹1,050

Strong green candle

Reading the wicks: who pushed, and who pushed back

Bodies get the attention, but wicks carry a lot of the story. A long lower wick means that at some point during the session price was much lower, and buyers stepped in hard enough to drag it back up. A long upper wick means the opposite: price was much higher at some point, and sellers knocked it down.

A good habit is to read every candle as a small story with a beginning, a fight and an ending. "Opened at 1,040, sold off to 960, buyers fought back and it closed at 1,045" is a lot more useful than "hammer".

Six shapes worth knowing

Tap a shape to see what it looks like and how traders usually read it.

Doji

Looks like: Open and close are almost the same. Price moved both ways during the session but finished where it started.

Usual reading: Indecision. Neither side won the session. After a long run in one direction, some traders treat it as a sign that the push is tiring.

Hammer

Looks like: Small body near the top, long lower wick (at least twice the body), little or no upper wick.

Usual reading: Sellers pushed price well down, then buyers took it back up before the close. After a fall, traders watch it as possible support. The same shape after a rise is called a "hanging man".

Shooting star

Looks like: Small body near the bottom, long upper wick, little or no lower wick.

Usual reading: Buyers pushed price up, then sellers pushed it back down. After a rise, traders watch it as possible rejection of higher prices. After a fall the same shape is called an "inverted hammer".

Marubozu

Looks like: A big body with almost no wicks. A green one opens near the low and closes near the high.

Usual reading: One side was in control from the open to the close. A green marubozu shows strong buying through the whole session; a red one shows strong selling.

Bullish engulfing

Looks like: Two candles. A red candle, then a bigger green candle whose body covers the whole red body.

Usual reading: Buyers took back everything sellers did the day before and more. Traders watch for it after a decline.

Bearish engulfing

Looks like: Two candles. A green candle, then a bigger red candle whose body covers the whole green body.

Usual reading: Sellers erased the previous day's gain and more. Traders watch for it after a rise.

Context beats shape

The same hammer means very little in the middle of a sideways, choppy week. After a steady fall, at a price where the stock bounced before, and with volume picking up, traders give it a lot more attention. Some practical checks:

What came before? Most patterns are named for what they do after a trend. Without a trend, they are just candles.
Where is it? A shape near a level where price has turned before carries more weight than one in empty space.
What does the next candle do? Many traders wait for the next session to confirm instead of acting on one candle.
Which timeframe? A hammer on a 5-minute chart is a few minutes of trading. On a weekly chart it is a whole week. They are not equal.

Quick check: 3 questions

1. A stock opens at ₹500, touches ₹522 and ₹498, and closes at ₹520. What colour is the candle?

2. A candle has a small body near the top and a long lower wick. What does the long lower wick tell you?

3. Which hammer deserves more attention?

What candlesticks cannot tell you

A candle records what already happened. Patterns describe how buyers and sellers behaved, and traders use them as clues, but no shape has a fixed success rate and none of them tells you what the next session will do. Gaps, news and the wider market can overrule any pattern. Use candles to understand the price action, then make decisions with a plan for risk. The position sizing post covers that part.

Live example: one real candle, read aloud

Take Nifty's daily candle for 4 June 2024, the election result day, and read it the way this post teaches.

The index opened sharply lower, far below the previous close, as counting trends surprised the market. It kept sliding through the morning, at the worst point trading close to 8.5% down. Then buyers appeared in the afternoon and pulled it well off that low into the close, which came in around 5.9% down on the day.

Colour: red, close far below open. Sellers owned the day.
Body: large. This was conviction selling, not drift.
Lower wick: long. At the extreme low, buyers stepped in hard; the index closed well above the worst price of the day.
The story in one line: "Panic at the open, heavy selling, and a late fight-back that recovered part of the damage."

That one candle told you the session's whole drama without a single news headline. It still told you nothing certain about the next day, and in fact the market stabilised and rose in the sessions after. A candle describes; it does not promise.

Based on public NSE data for 4 June 2024; percentages are approximate.

Important: This post is for education only. It is not investment advice and not a recommendation to buy or sell any security. The numbers in the examples and tools are illustrations, not forecasts. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, enlistment as RA with Exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.