3. Reading a single candle
In the 1700s, in Osaka, Japan, rice was traded at the Dojima rice exchange. A merchant named Munehisa Homma became famous for studying not just rice prices, but the emotions of traders behind them. Methods from that era of Japanese rice trading grew into what we now call candlestick charts.
They reached the Western world much later, in 1991, through the book Japanese Candlestick Charting Techniques by Steve Nison. Today, almost every trader in the world uses them.
3.1 Parts of a candle
- Body – the box between open and close. A big body means one side was strongly in control. A small body means a balanced fight.
- Upper wick – the line above the body. It shows how high price went before being pushed back.
- Lower wick – the line below the body. It shows how low price went before being pushed back.
- Colour – green if close > open, red if close < open.
Play with it. Move the sliders and read what the candle says:
3.2 Reading the story
Each candle is a short story of one period. Ask three questions:
1. Who won? Colour tells you. Green – buyers. Red – sellers.
2. How convincingly? Body size tells you. A big body that covers most of the range = a strong win. A tiny body = a draw.
3. Where was there rejection? Wicks tell you. A long lower wick means sellers tried to push price down, but buyers rejected those low prices. A long upper wick means buyers tried, but sellers rejected the higher prices.
Wicks are footprints of rejected prices. When you see long wicks at the same price level again and again, that level is important. You will meet this idea again in support and resistance.
3.3 One candle is not enough
Here is the most important lesson about candles: context is everything. A long lower wick after a big fall can mean buyers are arriving. The same candle in the middle of a choppy range may mean nothing. Always ask: where did this candle appear?
Jab bhi koi candle dekho, use apne aap se bolo – "Buyers pushed it to here, sellers pushed it back to there, and it closed here." Sounds silly, but this habit makes you read charts like a story instead of colours.
The long lower wick shows lower prices were rejected. Buyers took control by the close.
Close (₹201) is above open (₹200), so it is a green candle – even though it gave back most of its gains, which the long upper wick shows.
A full-body candle (called a marubozu) shows strong control by buyers (green) or sellers (red).
- A candle has a body (open to close), an upper wick and a lower wick.
- Colour = who won. Body size = how strongly. Wicks = where prices were rejected.
- Candlesticks came from Japanese rice trading and were popularised worldwide by Steve Nison.
- One candle means little without context. Always ask where it appeared.
- Ek line mein: Rang batata hai kaun jeeta, body batati hai kitna jeeta, aur wick batati hai kahan se bhagaya gaya.