Candlestick
Quick Answer
A candlestick is a price-chart element that summarises an instrument’s open, high, low and close prices over a specific timeframe. Its body shows the relationship between the opening and closing prices, while the upper and lower shadows show the highest and lowest prices reached during that period.
How does a Candlestick work?
Each candlestick represents one defined period of market activity.
For example, on a:
1-minute chart → one candle represents 1 minute
1-hour chart → one candle represents 1 hour
Daily chart → one candle represents one trading day
MetaTrader 5 describes a timeframe as the period represented by one bar or candlestick. Its charts support timeframes ranging from one minute to one month.
Each candle contains four core prices:
Open: the price at the beginning of the period.
High: the highest price reached during the period.
Low: the lowest price reached during the period.
Close: the price at the end of the period.
Together, these are commonly referred to as OHLC data.
Key features of a Candlestick
A standard candlestick contains several visual components:
Real body: The rectangular area between the open and close prices.
Upper shadow or wick: The line extending from the body to the period's high.
Lower shadow or wick: The line extending from the body to the period's low.
Bullish candle: Usually represents a period where the closing price is above the opening price.
Bearish candle: Usually represents a period where the closing price is below the opening price.
Doji: A candle where the open and close are identical or very close, resulting in a very small body.
The exact colours used for bullish and bearish candles are configurable. MetaTrader 5, for example, allows users to choose separate colours for bullish and bearish candle bodies and their edges.
Simple Candlestick example
Suppose a one-hour candle has:
Open: 1.1000
High: 1.1060
Low: 1.0980
Close: 1.1040
Because the close is above the open:
1.1040 > 1.1000
the candle would normally be described as bullish.
Its body extends from:
1.1000 to 1.1040
The upper wick extends from:
1.1040 to 1.1060
and the lower wick extends from:
1.1000 to 1.0980
The full price range of the candle is:
1.1060 − 1.0980 = 0.0080
or 80 pips for a currency pair quoted to four decimal places.
This example is illustrative only and does not represent actual FxGrow pricing or market data.
Potential benefits and uses
Candlestick charts allow traders to see more information than a simple closing-price line.
They can help display:
the direction of price movement during each period;
intraperiod highs and lows;
the relationship between the open and close;
changes in volatility;
periods of consolidation;
potential shifts in momentum;
recurring chart formations.
Candlesticks are commonly used alongside support and resistance, trend lines, moving averages and other technical-analysis tools.
MetaTrader 5 supports candlestick charts alongside bar and line charts, allowing users to switch between different representations of the same underlying price data.
Risks, limitations and common misconceptions
A common misconception is that the colour of a single candle reliably predicts the next price movement.
It does not.
A bullish candle only shows that the closing price was above the opening price for that specific period. It does not guarantee that the next candle will also rise.
Likewise, a bearish candle does not automatically signal that price will continue falling.
Candlestick patterns should also not be interpreted without context. The meaning assigned to a candle can depend on:
the timeframe;
the preceding price trend;
surrounding support and resistance;
volatility;
subsequent price action.
Another important point is that chart construction can depend on the market and platform. MetaTrader 5 notes that OTC charts are generally formed from Bid prices, while exchange instruments can be formed using Last prices.
This means a chart's candles are a representation of the platform's underlying price data rather than a universal record that must look identical across every trading venue.