Primer
Every candlestick on a chart records four numbers over one slice of time. Once you can read those four numbers at a glance, most of technical analysis stops looking like decoration and starts looking like data.
A candle covers a fixed period — five minutes, an hour, a day. Whatever the period, it records the same four prices.
The first and last trade of the period. The thick body spans the distance between them.
The furthest price reached in each direction. The thin wicks reach out to them from the body.
A wick marks ground that was covered and then given back. Price went there, and by the close it had not stayed.
Green: closed above where it opened. Red: closed below.
None of these are signals on their own. They describe what happened inside one period — useful context, not instructions.
Open and close far apart, wicks short. The period moved in one direction and stayed there.
Closed almost exactly where it opened, after covering ground both ways. A period that resolved nothing.
Price fell well below the body and came back before the close. Sellers reached down and didn't hold it.
The mirror image. Price pushed up, then gave it back before the period closed.
The same shape reads differently depending on what surrounds it. Three arrangements are worth knowing by sight.
Each pullback stops above the last one. Red candles appear, but they don't reclaim the previous low.
Every bounce fails below the previous one. The mirror of the above, and just as much a pattern.
Price keeps turning at roughly the same two levels. Most markets spend most of their time here.
Where the name comes from
A candle's high and low describe one period in isolation. But markets don't restart at each bar — a period can open well away from where the last one closed, and that jump is movement the candle's own high and low never account for.
True range closes that gap. It takes the widest of three distances: the candle's own high to low, and each of those compared against the previous close. Averaged over time, it gives you a working measure of how far this market typically travels — which is what makes it possible to say whether a given move is ordinary or unusual for the instrument in front of you.
That measure is what our indicator suite is built on.
The candle's own high-to-low misses the gap. True range doesn't.
Most of the trouble people run into with candlestick reading comes from the same handful of mistakes.
A long lower wick tells you what already happened. It does not tell you what happens next, and most named patterns fail more often than the labels suggest.
A decisive five-minute candle can be a wick on the hourly chart. Neither is the real one — they're different questions.
The same shape means different things at the top of an extended run than it does inside a quiet range.
Overnight and pre-market bars can print dramatic shapes on very few trades. The drama is often an artifact.
Our indicator suite for TradeStation puts true range measurement directly on the chart, so extension and compression are visible rather than something you estimate by eye. It's built to be readable whether or not you came from a trading desk.
See the indicators