How to read candlestick charts

A candlestick chart shows the same price as a line chart, only in more detail. Each candle is a slice of time: an hour, a day or a week, depending on the period. It shows four prices at once.

What a candle is made of

• The body, the thick part, runs from the opening price to the closing price.
• The wicks are the thin lines: the highest and lowest prices of the period.
• The colour shows direction. Usually green is up and red is down. In black and white, a rise is hollow and a fall is filled.

How to read it

A long body means the price moved firmly one way. A short body with long wicks means it was thrown back and forth and ended up about where it started. A long lower wick says the price was pushed down but buyers stepped in.

Which period to pick

Start with a long period such as a month to see the overall direction, then a short one to pick your moment. One good day inside a falling month is often just a brief bounce.

What candles cannot do

A chart shows the past. A pretty picture does not promise a rise tomorrow, and a sharp spike on news often fades. So read candles alongside the news, and always decide in advance where you will get out if you are wrong.