Candles: what one candle tells you
The shape matters because it tells you who was in control during that slice of time. A long body means the price moved a long way from open to close. A small body means it ended near where it started. A long upper wick means the price went up and then came back down before the candle closed. None of this is a prediction. It is a record of what already happened.
The word candle and the four numbers inside it
The word comes from the shape. A candle on a chart has a thick part and a thin part. The thick part is the body. The thin parts above and below are wicks, also called shadows. The name is old and has nothing to do with the market itself. It is just a word for a picture of four numbers.
Those four numbers are the open, the high, the low and the close. The open is the first price of the slice of time. The close is the last price of that same slice. The high is the highest price reached. The low is the lowest price reached. Every candle on every chart is built from those four figures.
On a platform, you do not usually see the four numbers written out. You see the shape they make. A green or white body often means the close was above the open. A red or black body often means the close was below the open. The colours vary between platforms, so check your own settings. The shape is the same idea either way.
Reading the shape without turning it into a forecast
The body length is the distance from open to close. A long body means the price travelled a long way between the first and last price of the slice. A short body means it ended near where it began. Neither shape says what the next candle will do.
A wick shows a price that was reached and then left before the close. A long upper wick means the high was far above the close. A long lower wick means the low was far below the close. The wick is a record of movement inside the slice, not a message about the future.
A candle with no wicks is called a marubozu on some platforms. It means the open and close were also the high and low. A candle with almost no body is called a doji on some platforms. It means the open and close were nearly the same. These names describe shape only. They do not change the four numbers underneath.
Pip value and the cost of a candle in local currency
A pip on AUD/USD is 0.0001 in price. If the body runs from 0.6640 to 0.6652, the distance is 0.0012. That is 12 pips. The pip count comes from the price difference alone, before any money is involved.
To turn pips into dollars, you need the pip value for your lot size. On one standard lot of AUD/USD, a pip is worth about A$15.06 at the rate used here. So 12 pips is 12 times A$15.06, which is A$180.72. This figure varies with the exchange rate and with the broker.
Brokers may round pip values, quote a slightly different price, or charge a spread or commission on top. A candle that looks like A$180.72 on paper may not be that amount in your account. Check your own platform for the exact figures. The arithmetic is yours to do, not the candle's to promise.
One candle on AUD/USD: four numbers and one pip value
| Step | Amount | Note |
|---|---|---|
| Open | 0.6635 | the first traded price in the slice of time |
| High | 0.6650 | the highest price reached in that slice |
| Low | 0.6628 | the lowest price reached in that slice |
| Close | 0.6640 | the last traded price in that slice |
| Body size in pips | 5 pips | close minus open: 0.6640 minus 0.6635 = 0.0005, and 0.0005 is 5 pips |
| Upper wick in pips | 10 pips | high minus close: 0.6650 minus 0.6640 = 0.0010, which is 10 pips |
| Lower wick in pips | 12 pips | open minus low: 0.6635 minus 0.6628 = 0.0007, which is 7 pips |
| Value of one pip on one standard lot of AUD/USD | A$10.00 | one standard lot is 100,000 units, and 100,000 x 0.0001 = 10 units of the quote currency, which is USD; at 0.6640 that is about A$15.06, but the exact figure varies with the rate and with the broker |
| Value of the body on one standard lot | A$75.30 | 5 pips x A$15.06 per pip, rounded to the nearest cent; this varies with the rate and with the broker |
Brokers may round pip values, quote a slightly different price, or charge a spread or commission on top. Check your own platform for the exact figures.
Doing it once, step by step
You will read one candle on AUD/USD by finding its four numbers, working out the body and wicks in pips, and turning the body into dollars on one standard lot.
- 01
Find the four numbers
Open your platform and pick one candle on the AUD/USD chart. Write down its open, high, low and close. These are the only numbers you need for the rest of the steps.
- 02
Measure the body
Subtract the open from the close if the close is higher. If the close is lower, subtract the close from the open. The result is the body in price terms. Divide by 0.0001 to get pips.
- 03
Measure the upper wick
Subtract the close from the high if the close is the higher of the two. If the open is higher, subtract the open from the high. Divide by 0.0001 to get pips.
- 04
Measure the lower wick
Subtract the low from the open if the open is lower. If the close is lower, subtract the low from the close. Divide by 0.0001 to get pips.
- 05
Convert the body to dollars
Multiply the body in pips by the pip value for your lot size. On one standard lot at A$15.06 per pip, 12 pips is A$180.72. This varies with the rate and the broker.
- 06
Check your own platform
Compare your figures with the prices shown on your platform. Brokers may round pip values or charge a spread or commission. The exact amount in your account is the one on your statement.
The mistake most people make here
The common mistake is to treat a long wick as a signal to buy or sell. A wick is only a record of a price that was reached and then left. It does not say what happens next. Another mistake is to read the body as profit or loss. The body is the distance from open to close, not your result. Your result depends on where you entered, where you exited, your lot size and the costs your broker charges. Read the four numbers first, then decide what, if anything, they mean for your plan.Check yourself
A candle on AUD/USD opens at 0.6640 and closes at 0.6652. How many pips is the body, and what is that worth on one standard lot at A$15.06 per pip?
The body is 0.6652 minus 0.6640 = 0.0012, which is 12 pips. At A$15.06 per pip, 12 x A$15.06 = A$180.72. This varies with the rate and with the broker.
A candle has a high of 0.6660 and a close of 0.6645. How many pips is the upper wick?
The upper wick is 0.6660 minus 0.6645 = 0.0015, which is 15 pips.
A candle opens at 0.6630, has a low of 0.6618, and closes at 0.6624. What is the lower wick in pips?
The lower wick is the open minus the low: 0.6630 minus 0.6618 = 0.0012, which is 12 pips. The body is 0.6630 minus 0.6624 = 0.0006, which is 6 pips.
Questions that come up next
How long does one candle last on a chart?
It depends on the timeframe you have chosen. On a one-minute chart each candle covers one minute. On a four-hour chart each candle covers four hours. The four numbers work the same way at every setting. Only the length of the slice changes.
Why is the same candle a different colour on another platform?
Platforms choose their own colours for a close above the open and a close below the open. One may use green and red, another white and black. The colour is a setting, not a rule of the market. Read the body direction instead of trusting the shade.
What happens when the open and close are the same price?
The body shrinks to almost nothing and the candle is mostly wick. Some platforms call this shape a doji. It records that the price ended near where it began, even if it travelled far in between. It is still just four numbers.
Does a long wick mean the price will fall back?
No. The wick records a price that was reached and then left before the close. That has already happened. What comes next is a separate question and is not contained in the shape. Treat the wick as history, not as a forecast.
How do I work out what a candle is worth in dollars?
Count the pips in the part you are measuring, then multiply by the pip value for your lot size. On one standard lot of AUD/USD, a pip is about A$15.06 at the rate used here. A 12-pip body is therefore 12 times A$15.06, or A$180.72. The pip value varies with the rate and the broker.
Where do the four numbers come from?
They come from the trades that were matched during that slice of time. The first matched price is the open and the last is the close. The highest and lowest matched prices are the high and the low. The platform draws the shape from those four figures.
The words used on this page
- body
- The thick part of a candle. It spans the distance from the open to the close of the slice. A long body means the price moved a long way between those two prices.
- wick
- The thin line above or below the body, also called a shadow. It marks the high or the low that was reached during the slice. It shows a price that was touched and then left.
- open
- The first price of the slice of time the candle covers. It is one of the four numbers the shape is built from. On a one-hour candle it is the price at the start of that hour.
- pip
- A unit of price movement. On AUD/USD one pip is 0.0001 in price. A move from 0.6640 to 0.6652 is 12 pips.
- pip value
- What one pip is worth in money for your lot size. On one standard lot of AUD/USD it is about A$15.06 at the rate used here. It varies with the rate and with the broker.
- marubozu
- A candle with no wicks, so the open and close were also the high and low. The name describes the shape only. It does not change the four numbers underneath.
What to take away
- Every candle is four numbers for one slice of time: open, high, low, close.
- The body is the open-to-close distance, and the wicks mark the high and the low.
- Pips come from the price difference; dollars come from the pip value for your lot size.
- The shape records what already happened and does not say what comes next.