The candle, and what it hides
Read a candle correctly and know exactly what information it destroyed.
A candle compresses a period into four numbers: open, high, low, close. The body is open-to-close, the wicks reach the extremes. Green means close above open. That is the whole definition — everything else you have heard is interpretation.
Key idea
What a candle destroys: the order in which things happened. A candle with long wicks on both sides could be a violent drop then recovery, or a rally then a dump. Identical candle, opposite stories. Drop to a lower timeframe if the order matters.
The three candles that are worth knowing
- ▸Long wick, small body ('pin bar', 'hammer') — price went somewhere and got rejected. Useful only at a level that already mattered, useless in the middle of nowhere.
- ▸Big body, no wicks ('marubozu') — one side controlled the whole period. Says something about conviction, nothing about what comes next.
- ▸Body engulfing the previous one — the classic reversal signal, and the most over-claimed. It is a reason to look, never a reason to enter.
Common mistake
Candlestick pattern names are a vocabulary, not a strategy. Every published study of single-candle patterns in isolation finds edges close to zero after costs. They earn their keep as descriptions of what just happened at a level you were already watching.
Tip
The single most useful habit: hover any candle and read the OHLC values in the top-left status line. Numbers cure a lot of pattern hallucination.
Check yourself
A daily candle has a huge lower wick. Someone says 'buyers defended that level'. What do you actually know?