How to Read Candlestick Charts Like a Pro

By Reda A. on June 6, 2025

Updated 31 August 2026. Reda uses candles the same way on crypto and FX charts: each bar is a fight between buyers and sellers for that period. A green body means the close was above the open. A long upper wick means the auction went higher and was sold. That is description. It is not “buy now.”

Anatomy, then location

Open, high, low, close. Body = open-to-close. Wicks = extremes that did not hold into the close. Colors are convention (we use green up / red down). Timeframe changes the story: a hammer on the 1-minute chart is not the same event as a hammer on the daily. In analysis we say the timeframe out loud so viewers are not mixing them.

Location beats shape. A hammer after a selloff into a level we already marked is information. The same hammer in the middle of a range is often just a pause. Engulfing bars work the same way: they mean this bar’s body ate the prior body. At a break of structure that can confirm a shift. Mid-range it can be two bars of chop.

Patterns we mention — and what we do not do with them

Hammer / shooting star: rejection of a low or a high. Useful only if that high/low was a level you cared about before the bar printed.
Engulfing: a change in who closed the auction. Still needs a stop beyond the pattern, not inside it.
Doji / small body: indecision or a pause. Not a reversal by itself.
Morning/evening star: three-bar stories. Easy to force-fit after the fact. We rarely name them live unless the structure is obvious.

We do not stack five pattern names to justify an entry. If the stop would sit inside the wick noise, the pattern is unused. Size still comes from invalidation and 1%, not from how “textbook” the candle looks.

Practice without folklore

On demo, mark two swing points, wait for a candle to reject one of them, write down what would invalidate, and see if you would have stayed in. Journal the ones that failed. Failed hammers teach more than a poster of 50 patterns. No screenshot in this article is a live call. Crypto and FX print the same OHLC; the volatility and gaps differ — crypto weekends do not close like FX Friday.

A bar is a record, not a personality

Hypothetical teaching print, not a live call: BTC prints a wide green daily candle after a week of lower highs. Comment sections will name it a “bullish engulfing of the month.” On our desk the questions are: did this close take out a level we already had on the chart, and where would the idea be wrong if the next two days give it all back? If the only “level” is the low of that same bar, you are using the pattern as both entry and stop. That is circular. The stop belongs beyond a swing that existed before the hero candle, or there is no trade.

Wicks lie less often than captions. A long lower wick into a known demand zone means sellers could not hold the auction at the low — for that period. The next period can auction right back through it. That is why we do not “buy hammers.” We note rejection at a price we already cared about, then we wait to see if the following bars accept higher. Acceptance is boring: closes holding above the level, not a single wick screenshot.

Timeframes, gaps, and crypto vs FX

FX spot on a retail platform is close to 24/5. Crypto is 24/7. A Sunday gap on a CFD gold chart is not the same animal as a Bitcoin wick on Saturday. When we teach candles we say which book we are looking at. A 15-minute doji during London on EURUSD can be a pause before the next push. A 15-minute doji on a mid-cap alt after a 40% pump is often just nobody left to buy. Same shape, different auction.

Heikin-Ashi and other averaged candles hide the true open and close. Fine for a glance at trend. Useless for placing a stop, because the stop has to live in the real market. If you use them, keep a raw candle chart for invalidation. We do not use them in the daily analysis for that reason.

How we talk about candles on stream

We will say “rejection at the high” or “this bar closed weak” more often than we will recite a Japanese name. Names are fine as shorthand if the room already agrees what they mean. They become folklore when five names get stacked to justify a late entry. If you want a drill: for ten sessions, forbid yourself from naming a pattern. Only write location, close versus open, and the pre-marked level. Then add names back if they still help. Size still comes from invalidation and 1%. Combine with how we split chart and calendar so a pretty bar into NFP is not treated as a setup.

No figure in this article is a signal. Crypto can gap in ways your stop does not expect. This is education, not a pattern encyclopedia and not financial advice.

Disclaimer: This article is for informational and educational purposes only. It is not financial advice. Trading Forex and cryptocurrencies involves substantial risk of loss.