Your broker says Harbor Coffee, our fictional coffee company, is down $1. Its daily candle says it rose. Which display is wrong?
For a separate gap example, keep the first lesson's $64 open and $66 close, but set the previous close at $67.
Both displays are right. They measure from different starting points. Before reacting to the color, find the two prices being compared.
Find the four prices
A candlestick compresses a trading interval into OHLC: open, high, low and close. The open is the first price in that interval; the close is the last. High and low mark the extremes.
A daily candle covers one day's trading; a weekly candle covers a week. These examples use completed daily candles from the regular session, with unadjusted prices. Check the chart settings before comparing bars: a live candle can still change until its interval ends.
Harbor's four prices are $64 open, $68 high, $63 low and $66 close.
The real body is the thick part joining the open and close. A wick, also called a shadow, is a thin line reaching from the body to a high or low. Harbor's body runs from $64 to $66; its wicks reach $68 above and $63 below.
Swap only the open and close, and the same outline becomes a falling candle.
On the rising candle, the close is the body's upper edge. On the falling one, it is the lower edge. The top of the body is not always the close.
For a quick check, find the close on each candle in StockCharts' opening diagram before reading its labels.
Separate the body from the day's change
Body length measures the distance between open and close, whichever is higher.
The vertical bars mean absolute value: drop any minus sign. Harbor's body is $66 − $64 = $2. Its full range is $68 − $63 = $5. The upper wick is $68 − $66 = $2; the lower wick is $64 − $63 = $1. Those three pieces add up to the full $5 range.
Harbor starts $3 below its previous $67 close. Its $2 rise recovers only part of that drop. It finishes $1 down, so the quote's daily change is ($66 − $67) ÷ $67 × 100 = −1.49%, rounded. An up candle can belong to a down day.
Our figures use hollow bodies when close is at or above open, and filled bodies when it is below. Platforms vary in their color and fill conventions; the OHLC values settle the question.
For Harbor's candle, the limits are simple:
| Question | Candle alone? | Extra information |
|---|---|---|
| Direction from open | Yes: open and close | None |
| Change from prior close | No | Previous close |
| High or low first | No | Intraday trades |
Harbor could travel $64 → $68 → $63 → $66, or $64 → $63 → $68 → $66. Either route leaves the same candle. You know the endpoints and extremes, but cannot reconstruct the trip between them.
For the amount traded alongside those four prices, read the volume pane.
Learn three names, then stop
A doji has equal or nearly equal opening and closing prices. Here, Harbor opens and closes at $66, yet trades between $64 and $68. Traders read this as possible indecision. A flat body does not mean a quiet day: prices still span $4.
A hammer candle follows a decline and has a small body near the high, a long lower wick and little or no upper wick. In the hammer and engulfing examples, Harbor's earlier closes are $69 and then $68.
Harbor's hammer opens at $65.50 and closes at $66, with a $66.20 high and $63.50 low.
The hammer's $2 lower wick is four times its $0.50 body; the upper wick is just $0.20. Swapping its open and close would still leave a hammer. Change the preceding decline to a rise, though, and the same outline gets a different name.
A bullish engulfing candle is the later up candle in a two-candle pattern after a decline. Its real body contains the preceding down candle's body.
Harbor's first body falls from $67 to $66. The next stretches from a $65.80 open to a $67.20 close. It reaches beyond both ends of the first body.
The second day's high is $67.40, below the first day's $67.50. Its low is higher, too. The larger body actually sits inside a smaller daily range. Engulfing concerns the bodies; the wicks need not be engulfed.
Traders watch hammers and bullish engulfing pairs for a possible turn upward. The next candle is still blank.
Read information, not instructions
Accurately describing four prices is one job. Showing that trading a shape earns money is another.
In a 2006 study, Marshall, Young and Rose tested candlestick strategies using daily prices for 35 US Dow Jones Industrial Average stocks during 1992–2002.
Their main tests held positions for ten days. The strategies showed no consistent advantage over buying and holding. That finding covers those tests, not every candle rule in every market.
A memorable name is not a measured probability. Anyone attaching a universal reversal percentage to a hammer needs evidence beyond its shape. The optional lesson on chart patterns explains how those claims are tested.
Harbor rose $2 from its open but finished $1 below its previous close. That resolves the opening puzzle.
On your next chart, read the interval first, then open and close, high and low, previous close, and surrounding history. Trends, support and resistance puts the individual bars into that sequence.
In short
- The body joins the open and close; wicks reach the interval's extremes.
- An up candle can still finish below the previous session's close.
- Different intraday paths can leave exactly the same candle.
- Named shapes describe what happened; they do not promise a reversal.