How to Read a Candlestick Chart
By VantureCap · Published July 15, 2026 · Updated July 21, 2026 · 6 min read
A candlestick compresses four prices into one shape: where a session opened, the highest and lowest prices it reached, and where it closed. The shape records what happened. It does not predict the next session by itself.
The four prices inside every candle
| Price | Where to find it | What it tells you |
|---|---|---|
| Open | one edge of the body | where the session began |
| High | top of the upper wick | the highest traded level |
| Low | bottom of the lower wick | the lowest traded level |
| Close | the other edge of the body | where the session finished |
Read one real candle
The final visible candle in this real, date-masked SPX chart opened at 4,532.24, traded as high as 4,551.44 and as low as 4,526.89, then closed at 4,549.78.
SPX · 50 daily candles · dates masked
Because the close finished above the open, the body is green. The close also sits near the high. Those are observations about price, not proof that buyers “controlled” the session: an OHLC candle does not show the path between its four printed prices, how long price spent near each level, or the order in which the high and low occurred. One strong candle can still be a bounce inside a larger decline.
Read the sequence, not the color
- Start with direction. Are closes generally rising, falling, or moving sideways?
- Look at range. Are bodies and wicks expanding, contracting, or staying steady?
- Find location. Is price near a recent high, recent low, moving average, or strike?
- Then read the last candle. Does it confirm the sequence or interrupt it?
Gaps and wicks need context
An opening gap compares the new open with the previous close. If the prior session closed at 4,500 and the next one opens at 4,506, the chart has a 6-point opening gap. A full gap is the stricter case: the new open is above the prior high or below the prior low. If the prior high was 4,510, that 4,506 open is not a full gap because the two sessions’ ranges can still overlap.
A long wick proves that price visited an extreme and moved away before the close. Calling that move “rejection” is an interpretation, not a forecast: the candle does not tell you why it happened or guarantee follow-through. Scheduled events, overnight news, and volatility regime can matter more than the shape.
Knowledge check: opening gap or full gap?
The prior session closed at 4,500 with a high of 4,510. The next session opens at 4,515. It is both: a 15-point opening gap from the prior close and a 5-point full gap above the prior high. If it had opened at 4,506, it would be an opening gap but not a full gap.
What this chart cannot tell you
- A daily candle does not show the order of every intraday move.
- Green and red do not measure option premium, implied volatility, or time decay.
- A masked chart removes hindsight, but it also removes the historical news story.
- No candle pattern replaces a defined loss, a breakeven, or a decision to stand aside.
Knowledge check: what does the upper wick mean?
It spans from the higher edge of the body to the session high. It proves price traded there; it does not prove sellers will control the next session.
Keep learning
- Use the chart to compare all four vertical spreads
- Add trend, volatility, and event context
- Connect price at expiration to spread P&L
Bank this lesson
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Playbook Trainer is an educational game built on historical market data. Nothing on this page is investment advice or a recommendation to trade. Options involve substantial risk; defined-risk spreads can lose their full maximum loss. Scenario dates are masked, and prices reflect historical option quotes with simplified fills.