Candlestick Anatomy and Price Interpretation
A candlestick summarizes the open, high, low and close of a price series during one interval. Its body connects the open and close; its wicks extend to the interval’s extremes. It describes completed activity, not the order in which every trade occurred.
How it works
For a rising candle, close exceeds open; for a falling candle, close is below open. Vendors may color these differently. A daily candle’s session boundary depends on the venue and feed. OHLC data cannot tell you whether the high occurred before the low, so intrabar stop and target assumptions cannot be reconstructed from one candle alone.
Worked example
Suppose an hour opens at 100, trades as low as 98 and as high as 105, then closes at 103. The body spans 100–103, the upper wick 103–105, and the lower wick 98–100. The range is 7 and the body is 3. A buyer at the open earned 3 per unit before costs, but the chart alone does not prove that a stop at 99 or target at 104 would have filled first.
Amounts, prices and scenarios are fictional teaching examples. They exclude any effects not explicitly stated and are not trade recommendations.
Limits and common mistakes
A long lower wick is not proof that institutions bought or that the next candle will rise. Check session hours, missing prints and corporate-action adjustments. Compare the body with recent ranges rather than interpreting its size in isolation.
Knowledge check
Can the candle establish which extreme occurred first?
Read the explanation
No. Both an open→high→low→close path and an open→low→high→close path can produce the same OHLC values. Use finer data if execution order matters.
References and further reading
These sources explain the underlying concepts and specifications. They do not endorse QBMFX Academy. Check the relevant market, protocol version and reporting rules before applying an example.