What is a candlestick?
One candle squeezes a whole period of price moves into one little shape with four prices.
One candle = one chunk of time
A (or just "candle") is a little shape that shows what price did during one chunk of time, called a . On a daily chart, each candle is one day. On a 5-minute chart, each candle is 5 minutes.
Four prices in one shape
Every candle shows four prices. Traders call them :
- : where price was when the period started.
- : the highest price during the period.
- : the lowest price during the period.
- : where price was when the period ended.
From a squiggly line to one candle
Imagine watching the price all day. It starts somewhere, climbs, drops, bounces, and finally ends somewhere. That squiggly path is on the left. The candle on the right is the same day, squeezed into one shape:
Notice the candle doesn't show the exact path. It only keeps the four prices that matter most: where it started, where it ended, and the highest and lowest points.
Why it's called a candle
It looks like a candle! A thick part in the middle (like the wax) and thin lines sticking out the top and bottom (like the wick).
Remember
- One candle = one period of time.
- Every candle shows Open, High, Low and Close.
- A candle is a whole period's story squeezed into one shape.
Check yourself
1. What does 'Open' mean on a candle?
2. On a daily chart, how much time is one candle?
3. What does OHLC stand for?
Next lesson: The parts of a candle
Money Tree School is education, not financial advice. Examples use made-up or historical numbers to show how things work; they are not recommendations to buy or sell anything. Markets can lose money.