Reading Candlestick Charts: A Practical Introduction
Understand candlestick anatomy, timeframes, and the most powerful single-candle and multi-candle patterns used by professional traders.
What Is a Candlestick?
Each candle represents price action during a specific time period (1 minute, 1 hour, 1 day, etc.). It shows four data points:
- Open: Price at the start of the period.
- Close: Price at the end of the period.
- High: Highest price reached.
- Low: Lowest price reached.
The thick body of the candle shows the range between open and close. The thin lines (wicks or shadows) show the high and low extremes.
- 🟢 Green candle: Close is higher than open — price rose during this period.
- 🔴 Red candle: Close is lower than open — price fell during this period.
Choosing Your Timeframe
Different timeframes serve different purposes:
| Timeframe | Used For |
|---|---|
| 1m, 5m, 15m | Scalping, very short-term entries |
| 1h, 4h | Day trading, swing trading setups |
| 1D | Identifying major trend direction |
| 1W, 1M | Long-term investment perspective |
On Cointivo's trading screen, switch timeframes using the buttons above the chart.
Key Candlestick Patterns
Doji
The open and close are almost equal, creating a cross shape. Indicates indecision — neither buyers nor sellers are in control. Look for what comes next to determine direction.
Hammer & Hanging Man
Small body at the top, long lower wick, little or no upper wick. A Hammer at the bottom of a downtrend signals potential reversal upward. The same shape at the top of an uptrend is a Hanging Man — bearish warning.
Engulfing Pattern
A two-candle pattern where the second candle's body completely engulfs the first:
- Bullish Engulfing: Green candle engulfs a red candle after a downtrend — potential bottom.
- Bearish Engulfing: Red candle engulfs a green candle after an uptrend — potential top.
Shooting Star
Small body at the bottom, long upper wick. Appears after an uptrend. Buyers pushed price up, but sellers drove it back down by close — bearish signal.
Morning Star / Evening Star
Three-candle patterns. Morning Star (bullish) = large red candle → small indecision candle → large green candle. Evening Star (bearish) is the mirror image.
Putting It Together
Candlestick patterns are more reliable when they form at:
- Key support or resistance levels
- Round number prices (e.g. $60,000 BTC)
- Moving average lines (e.g. 200-day MA)
Always confirm a pattern with volume — a reversal candle on high volume carries more weight than one on low volume.