Learn how candlestick formations reveal market sentiment and price action.
Candlestick charts condense a session's open, high, low and close into a single bar, making it easier to visualize the battle between buyers and sellers. A filled body indicates the price closed lower than it opened, while a hollow body shows a gain over the session.
The shadows or "wicks" extending from each end display the extreme highs and lows. Longer wicks point to heightened volatility and rejected price levels, whereas short wicks suggest most trading occurred within the body.
Analysts study individual candles and multi-bar patterns such as dojis, hammers and engulfing setups to gauge changes in market sentiment. When several candles align at areas of support or resistance, they often foreshadow an upcoming shift in momentum.
Candlesticks are most powerful when combined with other tools like volume and trendlines. With practice, they can help traders time entries and exits with greater confidence.