Technical & Chart AnalysisJapanese candlesticks
Candlestick Chart
A price chart where each period is drawn as a body spanning open to close plus wicks marking the period high and low.
What Candlestick Chart means
A candlestick chart plots four values for every period: open, high, low and close. The rectangular body spans the open and the close, and is conventionally coloured one way when the close is above the open and another when it is below. The thin lines above and below the body, called wicks or shadows, extend to the period high and low. Compared with a line chart, which shows only closing prices, the candle displays the whole trading range and the balance of pressure inside it.
Traders read candles for the relationship between body and wicks. A long body with small wicks suggests one side dominated from open to close, while a small body with long wicks suggests the period was contested and closed near where it began. Individual candles combine into recognised formations such as doji, hammers and engulfing pairs. The limitation is that a candle is a summary, not a sequence: it does not reveal the order in which the high and low were made, so the same shape can hide very different intraday paths.
Worked example
A four-hour USD/JPY candle that opens at 152.10, trades up to 152.75, down to 151.95 and closes at 152.60 is drawn with a body from 152.10 to 152.60, an upper wick to 152.75 and a lower wick to 151.95.
Related terms
- DojiA candlestick whose open and close are virtually identical, producing a tiny body that signals indecision between buyers and sellers.
- Hammer CandlestickA candle with a small body near the top of its range and a long lower wick, appearing after a decline as a potential bottoming signal.
- Engulfing PatternA two-candle formation in which the second candle's body completely covers the body of the first, signalling a possible reversal.
- Price ActionAn approach that reads raw price movement, candle structure and levels directly, with few or no derived indicators on the chart.
- TimeframeThe amount of time each candle or bar on a chart represents, from one minute up to monthly intervals.
Frequently asked questions
What does Candlestick Chart mean in forex trading?
A price chart where each period is drawn as a body spanning open to close plus wicks marking the period high and low.
How does Candlestick Chart work in practice?
Traders read candles for the relationship between body and wicks. A long body with small wicks suggests one side dominated from open to close, while a small body with long wicks suggests the period was contested and closed near where it began. Individual candles combine into recognised formations such as doji, hammers and engulfing pairs. The limitation is that a candle is a summary, not a sequence: it does not reveal the order in which the high and low were made, so the same shape can hide very different intraday paths.
What is an example of Candlestick Chart?
A four-hour USD/JPY candle that opens at 152.10, trades up to 152.75, down to 151.95 and closes at 152.60 is drawn with a body from 152.10 to 152.60, an upper wick to 152.75 and a lower wick to 151.95.
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