A level tells you where to look. The candle tells you whether buyers or sellers actually showed up there. Learning a few candle shapes lets you wait for evidence instead of guessing.
Anatomy of a candle
- Body: the distance between the open and the close. A close above the open is a bullish candle, below is bearish.
- Wicks (shadows): the high and low reached during the candle that did not hold by the close.
- On an H1 chart, each candle is one hour of trading.
Three shapes worth knowing
1. Rejection wick (pin bar)
A long wick, at least about twice the body, pointing into a level. A long lower wick at support shows sellers pushed price down and buyers pushed it back. A long upper wick at resistance shows the opposite.
2. Engulfing candle
A candle whose body completely covers the previous candle's body in the opposite direction. A bullish engulfing at support, or a bearish engulfing at resistance, shows a clear shift in control.
3. Doji and inside bars
Very small bodies, or a candle that stays inside the previous one, show indecision. On their own they are not a signal; they tell you to wait for the next candle.
Wait for the close
A candle can look like a perfect rejection halfway through the hour and then close as something else entirely. Only judge a candle after it has closed on the timeframe you trade.
Common mistakes
- Trading a pattern with no level nearby.
- Acting before the candle closes.
- Trading reversal patterns against a strong trend.
- Reading candles during major news, when wicks can be long simply because of volatility.
Key takeaways
- Level first, candle second.
- Rejection wicks and engulfing candles show who won at the level.
- Indecision candles mean wait, not trade.