Anatomy of a candle

Every candle shows four prices for the chosen period (1 minute, 1 hour, 1 day, etc.) – the so-called OHLC: Open, High, Low and Close.

The main parts

• Body – the rectangle between the open and the close. It shows the “net result” of the period.
• Upper wick (shadow) – the line from the body to the high. It shows how far buyers managed to get and where they were rejected.
• Lower wick – the line from the body to the low. It shows how far sellers pushed price down and where they were rejected.
• Bullish (green/white) candle – a close above the open. Buyers won the period.
• Bearish (red/black) candle – a close below the open. Sellers won the period.

In the original Japanese tradition, bullish candles are white (hollow), and bearish ones – black (filled). That's why in the classic literature you'll come across “white candle” and “black candle” – in this book we use the modern green and red.

Bullish and bearish – it's not just the color

The color only tells you who won the period. Much more important is how convincingly. A green candle with a small body and a huge upper wick actually shows buyer weakness – they pushed price up but didn't hold it. That's why we always read the candle as a whole: body + wicks + position.