How to Read Candlestick Charts: Bodies, Wicks and Key Patterns

Open 50.20, high 51.00, low 48.90, close 50.60. That is one daily candle, and every reading worth having comes from dividing those four numbers by each other, with the shape they draw coming last.

Measurement	Arithmetic	Result
Total range	51.00 - 48.90	2.10
Body	50.60 - 50.20	0.40
Upper wick	51.00 - 50.60	0.40
Lower wick	50.20 - 48.90	1.30
Body as a share of range	0.40 / 2.10	19%
Lower wick as a share of range	1.30 / 2.10	62%
Close inside the range	(50.60 - 48.90) / 2.10	81%

Sellers took the stock 1.30 below the open. Buyers gave none of it back by the bell. The close landed in the top fifth of the day. Those are facts about supply and demand at specific prices, and they came out of four subtractions and three divisions, none of which required an opinion about the company.

The colour is the least informative mark on the chart

This candle closed above its open, so a platform draws it green or hollow. That single bit is what most beginners read first. It is the weakest thing on the bar.

A red candle closing at 81% of its range had buyers in control at the end of the session despite finishing below where it opened, and a green candle closing at 25% of its range spent the whole afternoon being sold. Colour compresses that comparison into one bit. It discards where the close sat relative to everything else that traded.

A wick is rejected price, and it conceals the sequence

Price traded at 48.90 and did not stay. Somebody was willing to sell there. Somebody else was willing to absorb it, and the absorption won by the close. That is genuine information about where demand sits, which is why a wick printed inside a level you marked beforehand matters and the same wick in open space does not.

There is a limit, and it is a real one. A candle does not record the order in which prices were reached. This bar could have traded down to 48.90 in the first hour and then recovered all day, or rallied to 51.00 first and sold off into a late bounce. The drawing is identical in both cases and the two sessions mean different things. If the sequence matters to your reasoning, drop to a shorter timeframe and look. The daily candle will not tell you.

The wick earns its interpretation from location. A 1.30 lower wick that pokes into a support zone you drew last week is one kind of event, and the same wick with nothing underneath it is a day when the stock moved around. Draw the zones first, using the support and resistance guide. Read the candles second.

What one candle summarises depends on the timeframe

A weekly candle contains five sessions of two-sided trading. A five minute candle can be the residue of one institutional order working through the book, and the two are drawn identically while the evidential weight between them differs by orders of magnitude.

Daily bars are the sensible default. Each one includes the opening and closing auctions, where a large share of the day’s volume prints, and they produce few enough formations that you can examine every one on a watchlist. A shape that appears forty times a session is noise by frequency alone. That is what a two minute chart produces.

The named shapes, and what each one measures

Formation	Definition in numbers	What it records
Hammer	Body in the top third of the range, lower wick at least twice the body	A decline inside the period that was bought back before the close
Shooting star	Body in the bottom third, upper wick at least twice the body	An advance inside the period that was sold into before the close
Doji	Body under roughly 5% of the range	The period ended where it started after two-sided trading
Marubozu	Body above roughly 90% of the range	One side held control from the open to the close

Our candle qualifies as a hammer. Body 19% of range, lower wick 3.25 times the body. That name adds nothing to the ratios. It is a filing label.

Confirmation has a concrete definition, and confirmation is where most of the value in these shapes actually sits. The hammer is confirmed when a later candle trades above 51.00. It has failed when a later candle trades below 48.90. That low is the invalidation price. Put an entry at 51.10 and a stop at 48.85. Risk per share is 51.10 - 48.85 = 2.25. On a $30,000 account risking 1%, 300 / 2.25 = 133 shares. The candle supplied the two prices. It did not supply a forecast, and the position size does not need one.

Two-bar and three-bar formations

A bullish engulfing pattern is a down candle followed by an up candle whose body covers the previous body completely: the second candle opened at or below the prior close and finished above the prior open. The whole of the previous session was reclaimed inside one day. Bearish engulfing is the mirror.

Measure it against its neighbours first. The definition says nothing about scale. An up candle with a 1.20 range engulfing a down candle with a 0.90 range is a modest event, and an up candle with a 3.40 range swallowing three prior sessions is a different animal. Compare the engulfing candle’s range with the average range over the last 14 sessions, which is roughly what average true range gives you and is covered in the volatility indicators guide.

A morning star runs over three candles: a sizeable down candle, a small-bodied candle that stalls below it, then an up candle closing well into the body of the first, which reads as selling, then hesitation, then buying that undid a meaningful part of the decline. The evening star reverses the roles. In both directions, the invalidation is the low of the middle candle.

Measure the context before you name the shape

Three questions decide whether a formation means anything. Two of them have numerical answers.

Question	How to answer it
What is the trend on this timeframe?	Swing point sequence, slope of the 200-day average
Did the candle form at a level?	Distance from the nearest zone, as a percentage of price
How many people took part?	Today’s volume divided by the 50-day average

Take the third. With a 50-day average of 2.6 million shares and 6.5 million traded, 6.5 / 2.6 = 2.5 times normal. A rejection wick on 2.5 times normal participation involved many holders. The same wick on 0.7 times normal involved few. The volume analysis guide covers what heavy volume at an extreme tends to mark.

The first question dominates the other two. A bullish reversal candle inside a strong downtrend is a counter-trend bet however good the shape is, which means a tighter invalidation and a smaller share count. The technical analysis pillar sets out that order of operations in full.

Why there are no success rates on this page

The percentages attached to candlestick formations in most articles never say which stocks were tested, over which years, by what test a formation qualified, or what outcome was scored as success. They cannot be verified. They disagree with each other, and this site does not republish them. My own uncertainty here is genuine: I do not know how often a hammer at support is followed by an advance, and neither does anyone quoting a figure at you.

What survives is the arithmetic. A long lower wick means selling was absorbed within the session. A large body means one side controlled the period. Those statements need no citation because they are restatements of the four prices.

Candles also say nothing about scale. A doji on a stock that moves 1% a day and a doji on one that moves 8% a day are drawn identically and demand completely different stop distances, which is the dimension average true range supplies.

The candlestick scanner runs the daily market for hammers, engulfing bars, dojis and stars, which means you can spend your time judging where each one printed, and no time hunting for shapes by eye. Filter that output through the stock screener. Keep only names above their 200-day average or near a 52-week high.

Read the chart patterns guide next for the multi-week structures these bars form inside, then run the technical analysis basics quiz to check that the anatomy stuck.