Candlestick anatomy: what OHLC, body and wick actually tell you

Every trading chart in the world starts with the same primitive: a candle. It looks like a coloured rectangle with two thin lines sticking out of it. People glance at it and move on — but every candle is a compressed story of one period of trading, and reading it properly is the first skill that separates traders who guess from traders who measure.

The four prices that make a candle

A candle is built from exactly four numbers, collected over a fixed time window (one minute, one hour, one day — your timeframe):

• Open: the price at the start of the period. The first trade after the candle began.
• High: the maximum price reached during the period.
• Low: the minimum price reached during the period.
• Close: the price at the end of the period. The last trade before the next candle started.

That's it. Every charting tool in the world stores price data as OHLC tuples — open, high, low, close. Add volume and you have OHLCV, which is what backtesters consume.

Body and wick

Bullish candle (close > open):

  │← wick (upper)        High
  │
 ┌┴┐ ← top is the close
 │ │
 │ │ ← body (open at bottom, close at top)
 │ │
 └┬┘ ← bottom is the open
  │
  │ ← wick (lower)       Low

Bearish candle (close < open):

  │← upper wick           High
  │
 ┌┴┐ ← top is the OPEN
 │ │
 │ │ ← body (close at bottom, open at top)
 │ │
 └┬┘ ← bottom is the CLOSE
  │
  │ ← lower wick          Low

The body is the rectangle between the open and the close. Its colour tells you who won the period — green/white means the close was higher than the open (bulls), red/black means lower (bears). The body's length tells you how decisively. A long body is a strong move; a tiny body is indecision.

The wicks (also called shadows) are the thin lines above and below the body. They show how far price travelled beyond the body before reversing. An upper wick means buyers pushed price up but couldn't hold it; a lower wick means sellers pushed it down but couldn't hold it.

Reading a candle as a story

Every candle is a one-sentence story. The open is the starting point. The wicks tell you where buyers and sellers fought. The body tells you who won, and by how much. The close is where the consensus settled.

• Long green body, no wicks — bulls in control from open to close, no resistance.
• Long green body, tall upper wick — bulls drove price up, sellers rejected the top, but bulls still closed in profit.
• Long lower wick, small body — buyers absorbed a sell-off and rejected the low. A potential bottom signal, but only with confirmation.
• Doji (tiny body, comparable upper and lower wicks) — total indecision. The market is balanced; the next candle picks the side.

The information loss of OHLC

Here is what most retail traders miss: OHLC is a lossy compression of what actually happened. A 4h candle aggregates 14,400 seconds of price action into four numbers. You lose the order of events, the velocity, the volume profile within the candle, and any micro-structure. Two candles with identical OHLC can come from completely different intra-bar paths.

The smaller the timeframe, the less information is lost — but the more noise you have. The larger the timeframe, the more compression, but the cleaner the signal. There is no "correct" timeframe; there's a trade-off between signal quality and information freshness, and every strategy lives at a different point on that curve.

Referring to candle parts in rules

The platform's rule engine lets you reference any of the four prices on the current bar. The most common references are bar.close (the consensus settlement) and bar.open (the period's starting point). High and low show up in stop-loss placement and breakout detection.

# Close above 20-EMA
{ type: gt, left: bar.close, right: ema20 }

# Long lower wick (rejection of lows) — close in upper third of range
# Approximated as: (close - low) / (high - low) > 0.66
# Easier in code via a custom indicator that returns the ratio.

# Bullish engulfing — current body engulfs previous body
{ type: AND, children: [
  { type: gt, left: bar.close,    right: bar.open },             # green
  { type: gt, left: bar.close,    right: bar.previous_open },     # close above prev open
  { type: lt, left: bar.open,     right: bar.previous_close },    # open below prev close
]}

Next steps

Once you can read individual candles, the natural next step is patterns — but only the ones that actually backtest. See the candlestick patterns that survive a backtest post for the small list that holds up under measurement.