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Forex Candlesticks: How to Read a Single Candle the Way a Dealer Does
A candlestick is a snapshot of what price did over one chunk of time. The fat part in the middle, the body, shows you where price opened and where it closed. The thin lines sticking out the top and bottom, the wicks, show you the highest and lowest points price reached before that time was up.
That's it. Nothing fancy. Four numbers on a little colored bar.
But those four numbers are a record of what actually happened during that hour, and once you can read one candle properly, the chart starts looking readable- like a trail somebody left behind.
What forex candlesticks are actually made of
Every candle gives you four pieces of information.
The open is where price started.
The high is the furthest up it got.
The low is the furthest down.
The close is where it ended when the clock ran out.
Which chunk of time depends on your chart setting. On a one-hour chart, every candle is the movement over one hour. On the four-hour, each candle is four hours of movement squashed into one shape. Same market, same price, just a different zoom level. We mostly work with the 15-minute, the one-hour, the four-hour, and sometimes the daily.
Green means price closed higher than it opened. Red means it closed lower. If you've heard people go on about bulls and bears, this is where that lives on your chart, green being the bulls pushing price up and red being the bears driving it down.
And that's about where most explanations stop, which is why most people learn about forex candlesticks and still can't read a chart. Color tells you the direction. It doesn't tell you anything about whether that direction is going to hold. A big green candle at the top of a long run up can be a trap. A big red candle at the bottom of a long drop can be the springboard. Same shape, opposite meaning, and the difference is entirely about where it showed up on the chart.
Dealers leave clues in every candle
Here's what's really happening underneath the chart.
Someone with a very large position to fill needs orders filled on the other side of their own. In other words, If they need to buy, they need sellers orders. If they need to sell, they need buyers orders. Those orders are found on the playing field - the chart. They are sitting in clusters at the obvious highs and lows where we all put them. Price gets run into those clusters on purpose, the orders trigger, and then price continues whever it was headed.
The candle is the receipt for that. It's the only visible record of it.
When you look at a candle, read the behavior instead of the direction.
A long wick means price went somewhere and didn't stay. It got run up or down to some level, something happened there, and by the time the candle closed it had come back. Near a level price has already reacted to before, that's a dealer going out to grab orders and pulling straight back in.
A tiny body means price spent the whole period going nowhere. It moved around, it ended up where it started. Retail traders call this indecision. Often it's not indecision at all, it's a stall, and stalls tend to show up right before something big.
A big body with barely any wick means price went one direction and held it. That's real momentum, usually; or it's the bait. If it forms in the wrong spot at the wrong time of day, it's likely the trap.
None of those mean anything on their own. A long wick in the middle of a quiet range is just a long wick. The same candle at a level price has been rejected from twice already is something else entirely.
The patterns you'll see over and over
There are something like forty named candlestick patterns and you need about four of them.
The pin bar
also called a hammer or a spike depending on who's talking and which way it points. One long wick, small body. Price got pushed out to a level and rejected. When it happens at a level of interest, it's one of the better reversal cues you'll get.
The Doji
where the open and close land in basically the same place, leaving a candle with almost no body at all. The textbook answer is indecision. The more useful answer, most of the time,is that a cycle is ending and the next one is just getting started.
Railroad Tracks
which are two big candles back to back going in opposite directions. Price shoots hard one way and then immediately gets driven all the way back to where it started, leaving two long bodies side by side that look like, well, railroad tracks. That sudden full reversal is a trap for anybody who chased the first candle, and you'll very often find it on the second leg of a turn.
Morning/Evening Star
which are three candles instead of two. A strong push, then a stall, then a strong reversal. It's basically a doji with railroad tracks wrapped around it. Morning star forms near a low, evening star near a high, and if you can never remember which is which, you don't have to. What you're looking for is the shape of the story: hard move, pause, turn.
The spike, and what we actually call it
The Spike is the one that matters most in our style of trading.Technically a spike is a pin bar. A long wick, a small body, price going out and coming back. But when it is made on purpose, we call it a stop hunt, and once you've seen a few you'll see how effective these buggers are.
Here's the sequence. Price gets driven up above an obvious high. That triggers all the pending orders sitting above it, the buy stops from people waiting for a breakout, and it takes out the stop losses of ev-eryone who was short.
Suddenly there's a pile of fresh long positions up there. Then price comes right back down through the same area, stopping out every one of those brand new longs, and the dealer collects. Then, with the orders cleared out and everybody who was going to buy already stopped out, the real move goes the other direction.
On your four-hour chart that whole operation shows up as one candle with a long wick poking above the high. Drop to the 15-minute and the same thing is a set of railroad tracks. Same event, different zoom, and knowing that is how you stop being confused when the higher timeframe and lower timeframe seem to disagree.
Set your chart up so this is easy to see
Open TradingView, pull up EURUSD, and do two quick bits of housekeeping that will save you a lot of clicking later.
Favorite most used intervals.
Up in the top left, just right of the symbol name, there's a box showing your current interval.
Click it and you'll get every timeframe available, from seconds to months.
Star the 15-minute, the one-hour, the four-hour, and the daily. Now those four sit right up in the toolbar and you can flip between them without opening the menu.
Favorite chart style
Right next to the interval is the chart type button, currently set to candles.
Click it and you'll see a dozen chart styles. Star two of them, candles and line.
We're going to use both in a minute.
One more thing worth knowing. The price scale on the right side stays locked as you move between timeframes, so if you ever flip to the daily and feel completely lost, the prices on that side are your anchor. Also, if your chart ends up zoomed into nonsense, there's an auto-fit button at the bottom right of the price scale that snaps everything back to neatly fit your screen.
The exercise that makes wicks obvious
This is the exercise I want you to actually do, because it's a perfect way to show you what just reading can't.
Stay on the four-hour chart and scroll back to a stretch of about two weeks. Now switch your chart type from candles to line.
A line chart only plots the closing price. No bodies, no wicks, none of the noise. What you're left with is the bare structure of the move, and it's much easier to see the shape of it when the candles aren't in the way.
Take your horizontal line tool and mark the highest point of that two-week stretch, and the lowest point.
Now switch back to candles.
Look at what happens at your lines. The wicks stick out past them, above your high and below your low, in places the line chart never showed you at all. Those are dealer footprints. Price went up there, it grabbed what was sitting above the high, and it came right back inside.
This is also how you confirm the low and the high.
That's why I had you draw the lines while the wicks were hidden, because if you mark your levels while looking at candles, you unconsciously draw the line where the wicks end and you never notice the overshoot.
Look at the second low. If you see, there's a second spike poking below it and then price turns and runs upward. That first move low was manipulatoin. The move before it doesn't make sense as a genuine move down, but it makes complete sense as somebody clearing out the sell stops before going up.
Last thing, save it. Top right corner of your chart it probably says "Unnamed." Click that, rename it and hit save. Everything you draw from here on stays on that layout, so your markup becomes your notes instead of disappearing the next time you reload.
What you're practicing, and what you're not
We're not trading off candles yet. Nobody should be entering a trade because a doji showed up.
What you're doing right now is training your eye to recognize the behavior that comes before a move, so that later, when you're looking at a real setup, the spike above the high registers as information instead of scrolling past you. That takes reps and not much else. To practice, open the chart, pick a two-week window, run the line-and-candles exercise, and do it again on a different stretch of the year.
Where to practice this with me
This is Day 2 of Forex Fast Start, my free beginner course. I walk through the candle timeframes, the bodies and wicks, the patterns above, and the dealer spike, and then we go to the charts together and run this exact exercise on EURUSD.
Prefer to watch here? The candlestick lesson is on YouTube too.
Before you go anywhere else, go do the line chart exercise. Mark your high, mark your low, turn the candles back on, and count how many wicks poke past your lines. Screenshot it. That's the whole lesson, and it'll take you ten minutes.
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