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What are stock candlesticks? How to read them?

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Created on
March 3, 2023


What’s Inside

Stock market candlestick charts are tools that analysts and traders use — to spot stock-related trends and make informed trading decisions. Stock candlesticks provide essential info on the price movements of stocks (over the short term).

Candlestick chart analysis

Are you trying to pick up short-term stock trading? Or have interests in intraday trading? Then, learning how to read stock candlesticks is an essential skill to pick up. It visually shows the highest to lowest prices achieved, plus how a stock fared as the market opened and closed.

The Anatomy of a Stock Candlestick

A typical stock candlestick


The body is the rectangular part of the candlestick. It indicates the range between a stock's opening and closing price during any given window of time. 


The wicks, also known as the shadows, are thin lines emerging from the main body. These lines tell you a stock's highest and lowest price during the given time period. 


The colour of a candlestick indicates the overall direction of the price movement during a given period. Red (or black) means the stock's price has fallen, but green (or white) means the price has increased. 

How to read stock market candlestick charts?

You may need months or years of practice to read a detailed stock candlestick chart. However, getting the basics right can help significantly.

Observe the Body and the Wick

A longer body means that the stock prices changed by a larger range during the given time window, while a shorter body means the price range was tighter. 

As for the wicks, they tell you the highs and lows of the stock. If the opening or the closing price is the highest, the candle will have no upper wick. Similarly, if either the opening or the closing price was the lowest, you’ll find no lower wick. 

Look at the Colour

The colour is one of the easiest things to interpret in a stock candlesticks chart. You can get a good idea of the price movement during the timeframe by simply checking if the candle is green or red (or white or black, respectively). You don’t need to look at specific numbers to identify if a stock’s price rose or fell during the period. 

Check the Price Direction 

You can also compare the colours of adjacent candles to get a better idea of the overall price direction. A succession of several green (or white) candles may indicate a general bullish price direction. Similarly, red candles appearing in quick succession tell us of a market that is rapidly becoming bearish. Basically, Green/White = Good & Red/Black = Not so good!


Once you understand the basics of candlestick chart analysis, you can move beyond the basics to candlestick patterns. However, interpreting patterns such as the morning star, the shooting star, the hammer, the Doji, etc., may take time to pick up. Once you get better at it, you can use stock candlestick patterns to understand price movements and plan your purchases accordingly. It applies to stocks in India and abroad. So, if you’ve been thinking of adding some US stocks to your portfolio, Fi Money can help you own top stocks like Apple, Microsoft, Tesla and more. The best part is that there are no brokerage fees, and the forex rates are among the best in the industry. 

Frequently Asked Questions

1.How do you read a candlestick chart for beginners?

To read a candlestick chart, you need to observe the body, the wicks and the colour of the candles. You can then identify patterns in the chart and interpret your observations.

2.How do you read a 5-minute candlestick?

5-minute candlesticks are summaries of a stock’s prices for each 5-minute window during a trading session. You can read a 5-minute candlestick chart in the same way you read a regular chart. The only thing to remember is that each candle pertains to 5 minutes.

3.How do you predict stock price movements from candlesticks?

The colour of the candlestick can indicate the price movement during the given timeframe. A red (or black) body suggests that the price has decreased, while a green (or white) body means the price has increased.

4. What is the 3 candle rule?

The three-candle rule is a technical analysis pattern that involves looking for three consecutive candles with specific characteristics, such as long bullish or bearish candles, to help identify a potential trend reversal or continuation

5. How do you use candlesticks in the stock market?

Candlesticks are visual representations of a stock's price movements and can help traders identify important levels and patterns. By analyzing these candlesticks, traders can make better decisions about when to buy or sell stocks.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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