What does a single candle encode about a session?

Before any candlestick pattern makes sense, be clear about what one candle is: four numbers standing in for thousands of trades. Open, high, low, close. Everything the session contained — the order, the pace, the size, who was buying — is thrown away except those four.

That compression is the source of both the usefulness and the illusions.

The two parts, and what each one means

• The body (open to close) is the session's net verdict. It answers one question: after all the back-and-forth, did the price finish above or below where it started, and by how much?
• The wicks (high and low beyond the body) are rejected territory. The price went there and didn't stay. Someone was willing to trade at that level and the market moved away from it.

The single most-watched feature is where the close sits inside the range. A close near the top of a session's range says the session settled near its best level; a close near the bottom says it settled near its worst. Notice what that does not say: four numbers carry no timestamps, so the candle cannot tell you when in the session the high or the low was printed, or in what order. "The last hour belonged to buyers" is a sentence about a path the candle threw away. In markets that run a closing auction, the close is also the price at which that session's single largest match settles, which gives it genuine weight — more shares change hands at that one price than at any other in the day.

A worked example

Rounded and illustrative. Two sessions with an identical range:

• Session A — open $50.00, high $53.00, low $49.50, close $52.80. A tall body, a tiny upper wick. Read: the price traded as low as $49.50 at some point and still settled at $52.80, within $0.20 of its high and $2.80 above where it opened.
• Session B — open $52.80, high $53.00, low $49.50, close $49.90. Same high, same low, opposite meaning. Read: the session opened near its best level and finished near its worst.

Same $3.50 high-to-low range, completely different sentences. The pair is marked on the schematic below, so you can check that nothing but the open and the close differs between them.

Note that both readings stay inside what the four numbers support — where price opened, where it settled, and how far it travelled in between. The moment you add when something happened, you have left the data and started narrating. This is why candles beat a line chart for reading a single period — and it's the entire honest content of candlestick analysis.

Where the tradition comes from, and why that matters

Candlestick charting comes from Japanese rice trading in the 18th and 19th centuries, and reached Western traders largely through Steve Nison's 1991 book. It arrived with a vocabulary of vivid names — hammer, hanging man, three black crows, evening star. Those names are wonderful mnemonics.

Memorability is not evidence. A pattern with a great name gets noticed, repeated and remembered; the sessions where it appeared and nothing happened get forgotten. Keep the vocabulary and be suspicious of the folklore attached to it.

The boundary problem nobody mentions

A daily candle depends entirely on where the day is cut. For a stock this is set by exchange hours, which is at least consistent. But for a 24-hour instrument — FX, crypto — the daily boundary is an arbitrary choice of time zone. Shift it by four hours and identical trading produces a completely different set of candles, with different bodies, different wicks, and therefore different "patterns."

If a pattern's existence depends on which time zone your data provider uses, that's worth knowing before you build a story on it.

In the data

The order of events inside a candle lives in a different record: the session cut into five-minute bars, which is what locates a daily high in time. Those bars are commonly stamped in UTC, and then the New York session moves on the clock with US daylight saving. Here are the last print and the next opening bar in July, then the same pair in January:

The 09:30 open is the 13:30 bar from the second Sunday in March to the first Sunday in November, and the 14:30 bar the rest of the year. Intraday bars are also kept as traded, never adjusted for later splits or dividends, so they are not on the same price scale as an adjusted daily history.

Try it now

1. Describe the marked pair on the schematic above in one sentence each. Then try to write a third sentence about when inside either session the low was printed — and notice that you cannot, because the four numbers do not carry it.
2. Now do it on real sessions. In the month of daily candles below, find one session with a long body and small wicks and one with a small body and long wicks, and describe each in a single sentence about buyers and sellers.

3. Then try to recover the order of events inside one of them and fail again, for the same reason: a five-minute chart of that session is a different measurement, not a closer reading of this one. Everything above is built on four numbers that arrived without timestamps.
4. Failure hunt: find a dramatic-looking candle — a huge body or an enormous wick — after which the price did nothing notable for the next two weeks. One session is thin evidence, and this is how you prove it to yourself.