Candles: what one candle tells you
Why a candle is drawn the way it is
A candle is drawn from four prices that are recorded for one slice of time. The slice might be one minute, one hour or one day. On a USD/ZAR chart, the open is the first price of that slice. The close is the last price of that slice. The high is the highest price reached, and the low is the lowest price reached. Those four numbers are the whole candle.
The body of the candle is drawn between the open and the close. If the close is above the open, the body is often coloured one way. If the close is below the open, it is often coloured another way. The colours are a convention, not a signal. What matters is the distance between the open and the close, measured in rand.
The wicks are drawn from the body to the high and to the low. The upper wick runs from the top of the body up to the high. The lower wick runs from the bottom of the body down to the low. If the open and close are the same number, the body is a flat line and the candle is called a doji. That is still just four numbers.
What the body length measures in rand
The body length is the difference between the open and the close. On USD/ZAR at around 18.4100, a body of 0.0100 is one hundredth of a rand. If you hold 0.10 lots, that body is worth R100.00. The same body on 0.01 lots is worth R10.00. The candle looks the same on the chart, but the rand value changes with your position size.
A long body means the open and close were far apart. That tells you the price moved a lot inside that slice of time. It does not tell you why. A short body means the open and close were close together. That tells you the price ended near where it started. It does not tell you what happens next.
The body does not include the wicks. If the high was far above the body, that part of the move is not in the body length. To get the full range of the candle, you subtract the low from the high. On the same candle, 18.4250 minus 18.4000 is 0.0250. On 0.10 lots, that full range is R250.00. The body was only part of that.
What wicks show and what they do not
A wick shows that price traded at that level during the slice and then moved back. The upper wick shows the high was above the body. The lower wick shows the low was below the body. Both are records of where price went, not predictions of where it will go. A long wick does not mean the price will turn.
If the body is small and the wicks are long, the market disagreed with itself in that slice. Price moved up and down but ended near the open. That is information about the past slice only. The next candle starts fresh with its own open, high, low and close. Nothing in the wick forces the next candle to do anything.
You can measure a wick in rand the same way you measure a body. The lower wick is the open minus the low, when the close is above the open. On the example candle, 18.4100 minus 18.4000 is 0.0100. On 0.10 lots, that lower wick is worth R100.00. The upper wick is the high minus the close, which is 18.4250 minus 18.4200, or 0.0050. On 0.10 lots, that is R50.00.
One candle on USD/ZAR: four numbers, one rand value
| Step | Amount | Note |
|---|---|---|
| Open | 18.4100 | the first price of the slice of time |
| High | 18.4250 | the highest price in that slice |
| Low | 18.4000 | the lowest price in that slice |
| Close | 18.4200 | the last price of the slice |
| Body | 0.0100 | close 18.4200 minus open 18.4100 |
| Upper wick | 0.0050 | high 18.4250 minus close 18.4200 |
| Lower wick | 0.0100 | open 18.4100 minus low 18.4000 |
| Value of the body on 0.10 lots | R100.00 | 0.0100 × 0.10 lots × 100,000 per lot = R100.00 |
Your broker may quote a slightly different open or close, round the prices, and charge a spread or commission on top. Those charges vary between brokers, so check the fee schedule before you trade.
Doing it once, step by step
You will read one candle on USD/ZAR by writing down its four numbers first, then calculating what each part is worth in rand. Do these steps once, in order, before you look at any other candle.
- 01
Write down the four prices
Open your chart and pick one candle on USD/ZAR. Write down its open, high, low and close. For this walkthrough, use open 18.4100, high 18.4250, low 18.4000 and close 18.4200. Check that the high is the largest number and the low is the smallest.
- 02
Find the body in rand
Subtract the open from the close. 18.4200 minus 18.4100 is 0.0100. Multiply by your lot size and the contract size. For 0.10 lots, 0.0100 times 0.10 times 100,000 is R100.00. That is the body value.
- 03
Find the lower wick in rand
Subtract the low from the open. 18.4100 minus 18.4000 is 0.0100. On 0.10 lots, that is R100.00. This is the part of the candle below the body.
- 04
Find the upper wick in rand
Subtract the close from the high. 18.4250 minus 18.4200 is 0.0050. On 0.10 lots, that is R50.00. This is the part of the candle above the body.
- 05
Check the full range
Subtract the low from the high. 18.4250 minus 18.4000 is 0.0250. On 0.10 lots, that is R250.00. The body plus both wicks should add up to this range. Here, R100.00 plus R100.00 plus R50.00 is R250.00.
- 06
Compare with the next candle
Look at the next candle on the chart and write down its four numbers. Do not assume it will repeat the first candle. The only link is that the next open is often near the previous close, but your broker may quote it slightly differently. Check the fee schedule for spreads or commissions, as these vary between brokers.
The mistake most people make here
The common mistake is to treat a long wick as a promise that price will turn. A wick only shows that price went there and came back inside the same slice of time. It says nothing about the next candle. Instead, write down the four numbers first, then ask what the body and the wicks are made of. If the body is small and the wicks are long, the market disagreed with itself in that slice. Wait for the next close before you act on it.Check yourself
A candle opens at 18.4100, highs at 18.4250, lows at 18.4000 and closes at 18.4200. What is the body in rand on 0.10 lots?
Close minus open is 18.4200 − 18.4100 = 0.0100. On 0.10 lots that is 0.0100 × 0.10 × 100,000 = R100.00.
Using the same candle, what is the lower wick worth on 0.10 lots?
Open minus low is 18.4100 − 18.4000 = 0.0100. On 0.10 lots that is 0.0100 × 0.10 × 100,000 = R100.00.
If the close had been 18.4150 instead, what would the body be on 0.10 lots?
18.4150 − 18.4100 = 0.0050. On 0.10 lots that is 0.0050 × 0.10 × 100,000 = R50.00.
Questions that come up next
What is the difference between the body and the full range of a candle?
The body is the distance between the open and the close. The full range is the distance between the high and the low. On USD/ZAR, a candle might have a body of 0.0100 and a full range of 0.0250. The body is only part of the story; the wicks make up the rest.
How do I work out the rand value of a candle's move on my position size?
Take the price difference in rand, multiply by your lot size, and then by 100,000. For example, a 0.0100 move on 0.10 lots gives 0.0100 × 0.10 × 100,000 = R100.00. This works for any part of the candle you measure. The result changes if your lot size changes.
Does a long wick mean the price will reverse?
No. A wick only shows that price reached that level and then moved back within the same slice of time. It is a record of what happened, not a prediction. The next candle can do anything. Treat the wick as information about the past, not a signal for the future.
Why do some candles look green and others red?
The colours are a convention used by charting software. Often, a green body means the close was above the open, and a red body means the close was below the open. But different platforms may use different colours. What matters is the four numbers, not the colour.
What is a doji and what does it tell me?
A doji is a candle where the open and close are the same, so the body is a flat line. It shows that price ended the slice where it started, even if it moved around in between. It is still just four numbers. A doji does not predict the next move.
Can I use one candle to decide whether to trade?
One candle gives you four numbers for one slice of time. That is useful context, but it is not enough on its own. Many factors affect price, and a single candle does not tell you what will happen next. Most traders look at multiple candles and other information before making a decision.
The words used on this page
- candle
- A shape on a chart that shows four prices for one slice of time: open, high, low and close. The body is drawn between open and close, and the wicks reach to the high and low. It is a visual record, not a prediction.
- body
- The thick part of a candle, drawn between the open and the close. Its length shows how far apart those two prices were. A long body means a big move; a short body means a small one.
- wick
- The thin line above or below the body that reaches to the high or the low. It shows where price went during the slice but did not stay. Wicks are part of the candle's range but not part of the body.
- doji
- A candle where the open and close are the same, so the body is a flat line. It shows that price ended the slice where it started. The wicks may still be long.
- lot
- A standard unit of trade size. For USD/ZAR, 1 lot is usually 100,000 units of the base currency. The rand value of a price move depends on how many lots you hold.
- USD/ZAR
- The currency pair that shows how many rand one US dollar buys. It is quoted with four decimal places, so a move of 0.0100 is one hundredth of a rand. The pair moves constantly during trading hours.
What to take away
- A candle is four numbers for one slice of time: open, high, low and close.
- The body measures the distance between open and close; the wicks reach to the high and low.
- The rand value of any part of the candle depends on your lot size.
- A wick records where price went and came back; it does not predict the next move.