Candlestick chart basics: how to read OHLC, bodies and wicks

A candlestick is a compressed summary of everything the price did during one period: where it started, how far it travelled in each direction, and where it finished. Once you can read a single candle, a chart stops being a wiggly line and becomes a sequence of small stories about buyers and sellers.

The four prices behind every candle

Each candle is built from four numbers, usually abbreviated as OHLC:

• Open — the first price of the period.
• High — the highest price reached during the period.
• Low — the lowest price reached during the period.
• Close — the last price of the period.

Everything else you see is drawn from these four values. Nothing about the order in which the high and low happened is stored in the candle — a point worth remembering, because two very different minutes can produce identical candles.

Body, wicks and colour

The body is the rectangle between the open and the close. The thin lines above and below it are the wicks (also called shadows or tails): the upper wick runs from the top of the body to the high, the lower wick from the bottom of the body to the low.

Colour tells you the direction. On most charts a candle that closed above its open is green (a bullish candle) and one that closed below its open is red (bearish). Some traders prefer white and black or hollow and filled bodies; the logic is the same.

What the proportions suggest:

• A long body with short wicks means price moved decisively one way and stayed there until the close.
• A small body with long wicks means price travelled a lot but ended near where it started — a sign of indecision. The extreme version, where open and close are almost equal, is the doji.
• A long upper wick shows that price was pushed up and then rejected; a long lower wick shows the opposite.

"Suggest" is the important word. A candle describes what happened; it does not tell you what happens next.

A worked example

Imagine a one-minute candle on EUR/USD. The minute opens at 1.08500. Price first dips to 1.08470, then rallies to 1.08560, and finally settles at 1.08540 as the minute ends.

• Open = 1.08500, High = 1.08560, Low = 1.08470, Close = 1.08540.
• The close is above the open, so the candle is green.
• The body spans 1.08500 to 1.08540, which is 4 pips.
• The upper wick runs from 1.08540 to 1.08560 (2 pips); the lower wick from 1.08500 down to 1.08470 (3 pips).
• Total range, high minus low, is 9 pips.

Reading it: buyers won the minute, but not cleanly — sellers pushed price 3 pips below the open first, and buyers failed to hold the very top. A body of 4 pips out of a 9-pip range is a moderate, not a dominant, move.

One period, many candles: timeframes

The same price stream can be cut into periods of any length. Five one-minute candles combine into one five-minute candle: the open of the first, the close of the last, the highest high and the lowest low of all five. That is why a clean, strong-looking M5 candle can hide a choppy back-and-forth inside it, and why a frightening spike on S5 may be invisible on M15.

The Sky Trade terminal offers timeframes from S5 (five seconds) to D1 (one day). Lower timeframes show more detail and more noise; higher timeframes are smoother but slower to react. Neither is "true" — they are different zoom levels of the same movement.

What this means for short expiries

If you open a 30-second trade, a single M1 candle already covers twice your trade's lifetime, so it can only tell you about the backdrop. On S5 or S10 you see the moves that actually decide such a trade, but those candles are tiny and mostly random-looking. A sensible habit is to glance at one higher timeframe for context and use the lower one only for timing.

Heikin Ashi: smoothed candles

Heikin Ashi ("average bar" in Japanese) looks like a candlestick chart but uses modified values:

• HA close = the average of the period's open, high, low and close.
• HA open = the midpoint of the previous HA candle's body.
• HA high and low = the highest and lowest of the real high/low and the HA open/close.

The result is a smoother chart where trends show up as long runs of same-coloured candles with few wicks on one side. The trade-off: Heikin Ashi candles do not show real prices. The HA close is generally not the price the market actually traded at when the period ended, so you should never read entry prices or exact levels from it. Use it to judge the general direction, then switch back to regular candles for anything precise.

Common mistakes when reading candles

• Judging a candle before it closes. A candle that looks like a strong green bar with 10 seconds left can finish as a doji. The candle timer in the terminal settings helps you see how much time is left.
• Reading one candle in isolation. A long lower wick means something different at a well-tested support level than in the middle of nowhere.
• Treating colour as a forecast. Three green candles in a row do not make the fourth more likely to be green. On OTC instruments in particular, prices are generated by Sky Trade's server with an unpredictable next move and do not track any real market, so candle shapes there carry no hidden information about the future.
• Comparing candles across timeframes as if they were equal. A "big" S15 candle can be smaller in pips than an average M5 candle.

How to set it up in the Sky Trade terminal

Choose Candles (or Heikin Ashi, or Bars) in the chart-type selector above the chart, then pick the timeframe from S5 to D1 next to it. Switching chart types never changes the price your trade is settled at — trades are always decided by the server's actual price at expiry.