The great guide to OHLC Candlesticks

Candlestick charts are one of the most popular methods for visualizing how an asset’s price, such as a stock or cryptocurrency, changes over time. Each “candle” captures four key data points:

• Open: The price at the start of the time interval
• High: The highest price reached in that interval
• Low: The lowest price reached
• Close: The final price at the end of the interval

This is commonly referred to as OHLC. By providing both the opening/closing prices and the intra-interval extremes (high/low), candlestick charts offer a richer view than a simple line chart.

In this post, we'll explain candlestick charts and provide common examples of each pattern. After reading, you'll have a strong grasp of how to read candlestick charts.

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A brief history

Originating in 18th-century Japan, candlestick charts were famously used by rice traders to analyze market psychology and price movement. Over time, the method spread to the rest of the world, becoming a mainstay in modern technical analysis.

Despite the centuries, candlestick charts have thrived because they enable a quick visual assessment of price direction, volatility, and potential turning points.

Traders find that color-coded bodies (e.g., red vs. green) and prominent wicks/shadows help identify reversal or continuation patterns with a glance.

Why are candlesticks so valuable?

For a several reasons:

1. Immediate visual clarity
   Each candle color indicates if the price rose or fell, while wicks show how far price moved beyond that open-close range. This can quickly reveal both momentum and volatility.

2. Pattern recognition
   Candlestick patterns (e.g., Hammer, Doji, Engulfing) are widely recognized “signals” that may hint at upcoming trend shifts. While no pattern is guaranteed, they provide a useful framework for hypothesis-driven trading decisions.

3. Applies to any timeframe
   Whether you’re a high-frequency trader analyzing seconds-long intervals or a swing trader focusing on daily or weekly candles, the candlestick approach is flexible.

4. Universal appeal
   Candlesticks are used across equities, futures, forex, cryptocurrencies, and more, making them a universal language for financial charting.

How to read a candlestick chart

Candlestick charts are nuanced.

Each candle provides a solid amount of information.

Let's unpack one candle:

In a candlestick chart, each candle represents a specific time interval—this could be as short as 5 seconds, or as long as 1 day (or even a month), depending on your chart settings.

• Open is the price at the start of that interval, so 01:30:00 if you’re looking at 1-minute bars for example
• Close is the price at the moment the interval ends, which is 01:30:59 for 1-minute bars
• High and Low indicate the peak and trough the price reached at any moment during that interval, even if it briefly spiked or dipped between the open and close

Visually, each candle’s “body” shows the difference between the Open and Close, and the “wick” (or “shadow”) shows how far price extended beyond that body within the time window.

If the interval is larger (like 1 day), the candle reflects the entire day’s opening, highest, lowest, and closing prices. On smaller intervals (like 1 minute), you’re seeing more granular, short-term swings.

Therefore, the timeframe is crucial for context: the exact same candlestick shape might be far more meaningful on a daily chart than a 5-second chart, or vice versa, depending on your trading or analysis strategy.

Candlestick charts and time-series databases

Naturally, given their relationship to time-based data, modern candlestick charts often require a time-series database for data ingestion and a charting library or visualization tool like Grafana for visualization. A time-series database like QuestDB handles the often vast tick data ingestion requirement. While doing so, it can also handle out-of-order indexing, deduplication, compression and more.

With modern programming frameworks like React in conjunction with libraries like Apache Echarts, you can quickly create dynamic candlestick charts directly inside of your own applications.

The end result is a fluid, customizable and interactive chart such as this one:

This chart paints real-time BTC-USD tick data from our QuestDB demo instance.

Common candlestick patterns

The candlestick pattern is well known to traders and investors. Below are some of the most widely studied candlestick patterns. These patterns provide valuable signals to interpret the red and green movements in any candlestick chart. They are highly useful tools to quickly understand the market sentiment.

If you're interested in implementing these patterns in your own application, our candlestick chart tutorial shows you how to build the foundation.

Hammer

A single-candle bullish reversal pattern with a small body near the top of the candle range and a long bottom wick. Commonly appears after a downtrend.

Shooting Star

A near-mirror of the Hammer: a small body near the bottom of the candle range with a long top wick, often signaling a bearish reversal after an uptrend.

Doji

A candle where the open and close are nearly identical, leading to a very small or no real “body.” Shows indecision between buyers and sellers.

Bullish Engulfing

A two-candle pattern where a large green candle’s body fully engulfs the previous red candle. Suggests a strong shift from bearish to bullish sentiment.

Morning Star

A three-candle bullish pattern.

Typically:

1. A large red candle
2. A small-bodied (or doji) candle indicating indecision
3. A strong green candle closing above the midpoint of the first

It hints at a potential upward reversal.

Dark Cloud Cover

A bearish two-candle pattern:

1. A large green candle
2. A second candle that opens above (gapping up) but closes significantly into the body of the first

Often signals a potential shift from bullish to bearish momentum.

Piercing Line

The bullish counterpart to Dark Cloud Cover:

1. A large red candle
2. A second candle that opens below (gapping down) but then rallies, closing well above the midpoint of the first

Suggests a potential shift from bearish to bullish.

Evening Star

A bearish three-candle formation, mirroring the Morning Star:

1. A large green candle
2. A small-bodied or doji candle
3. A strong red candle closing below the midpoint of the first

May indicate a downward reversal after an uptrend.

Spinning Top

A single-candle formation with a small real body and wicks both above and below of similar length. Conveys indecision but with moderate intraperiod movement (volatility) in both directions.

Marubozu

A candle with no (or minimal) wicks, indicating price opened at (or near) the low and closed at (or near) the high for a bullish Marubozu (and vice versa for a bearish one). Typically signals strong conviction in one direction.

Conclusion

Candlestick charts remain one of the easiest ways to assess price trends, potential reversals, and market volatility at a glance for traders and investors. By pairing a time-series database for data ingestion with a charting library like ECharts or a visualization tool like Grafana, you can quickly generate, customize, and export candlestick visualizations.

Whether you’re a quant developer, algo trader, or curious data scientist, understanding candlestick analysis adds a valuable tool to your financial data toolbox.

Remember though: no pattern is foolproof! They’re best used as part of a broader strategy, which might include confirmation from additional technical indicators, fundamental analysis, or risk management practices. With that said, candlestick charts stand out for their elegance and clarity—over centuries and across all markets.