A candlestick displays four data points: open, high, low, and close. The body (the filled or hollow rectangle) spans from open to close — a filled/red body means close was below open (bearish session); a hollow/green body means close was above open (bullish session). Wicks (also called shadows) extend above and below the body to the session's high and low. A long upper wick on a bullish day means buyers pushed price high but sellers rejected the advance — a sign of supply overhead. A long lower wick on a bearish day means sellers pushed price low but buyers stepped in — a sign of demand support.

Conviction is encoded in body size relative to the full candle range. A large body with small wicks indicates a dominant session in one direction — high conviction. A small body with large wicks (a doji or spinning top) indicates indecision — neither buyers nor sellers controlled the session decisively. This indecision candle after a strong trend is a meaningful warning of potential reversal. Reading candlesticks is fundamentally about understanding who controlled the session and at what price levels control changed hands.

Reliable single-candle patterns include: the hammer (small body at top of candle, long lower wick — buyers rejected a strong intraday decline; bullish reversal signal at support), the shooting star (small body at bottom, long upper wick — sellers rejected a strong intraday advance; bearish reversal signal at resistance), and the doji (open and close nearly identical — indecision, more significant after extended trends). The engulfing pattern requires two candles: a bullish engulfing forms when a large green candle fully engulfs the prior red candle's body — buyers overwhelmed the prior session's sellers decisively.

Multi-candle reversal patterns carry more signal weight because they require consistent behavior across multiple sessions. The morning star is a three-candle bullish reversal: a large bearish candle, followed by a small-bodied indecision candle (gap lower), followed by a large bullish candle that recovers into the first candle's body. The evening star is the inverse — a three-candle bearish reversal. These patterns require at least partial gap formation between candles to be fully valid; without the gap, the pattern's reliability decreases. The key upgrade: all candle patterns gain validity when they occur at structurally significant levels — prior support, Fibonacci zones, or moving average intersections.

A hammer candlestick in the middle of a range provides minimal information — there is no established trend to reverse and no significant level to validate the demand signal. The same hammer at a well-tested support level after a 15-20% decline, accompanied by declining volume into the low and volume expansion on the hammer day itself, is a high-quality reversal signal. Location determines whether a candle pattern is signal or noise. This is the most important principle in practical candlestick application.

Volume is the essential confirmation tool for every candlestick pattern. A bullish engulfing on low volume suggests institutional participation is absent — the move may not be sustained. The same bullish engulfing with volume 2-3x the 20-day average indicates significant institutional buying interest — a far more reliable signal. Develop the habit of checking volume relative to the recent average for every significant candlestick pattern before treating it as actionable. This single discipline eliminates most false pattern signals.