How to Read Candlestick Charts: Common Patterns and Their Limits

Candlestick charts are the default view on most trading screens, and they are easy to read once you know what each part of a candle shows. They are also easy to over-read, so it helps to understand both what they show and what they cannot tell you.

What a Single Candle Shows

Each candle covers one time period, such as a minute, an hour or a day, and records four prices: the open, the close, the high and the low. The thick body spans the open and close. The thin lines above and below, called wicks, reach to the high and the low.

Reading the Colours

A candle is usually coloured one way if the price closed above where it opened and another way if it closed below. The exact colours depend on the platform, so check the chart's settings before assuming green means up. The body's length shows how far the price moved between open and close, and the wicks show how far it travelled beyond that before pulling back.

Common Patterns You Will Hear About

• Doji: a candle with a very small body, where open and close are nearly equal, often described as indecision.
• Hammer: a small body with a long lower wick, showing that sellers pushed the price down but buyers brought it back.
• Engulfing candle: a candle whose body is larger than and covers the previous candle's body, often discussed as a shift in momentum.

These names are shorthand for shapes, and each carries a common interpretation. None of them is a rule.

Why Timeframe Changes the Picture

The same market can look calm on a daily chart and chaotic on a five-minute chart. A pattern on a short timeframe carries less weight than one on a longer timeframe, because short windows contain more random movement. Checking more than one timeframe gives better context than relying on one.

Where Candlesticks Fall Short

A candle describes what has already happened. It does not say what will happen next, and patterns that look convincing in hindsight often fail in real time. Candles also say nothing about the size of the order book behind a move, or about news that arrived between one candle and the next.

Using Them Alongside Other Information

Candlesticks work best as one input among several, such as trading volume, the order book and the broader market. Whatever a chart suggests, fees apply to every trade. On Bitval, spot fees are 0.12% maker and 0.145% taker, so a pattern worth acting on has to be worth more than the cost of getting in and out.

You can create a Bitval account to see live charts on Bitval's spot and futures markets.

This article is for informational purposes only and does not constitute financial advice. Chart patterns do not predict future prices. Trading crypto carries risk, including the loss of your capital.