How to Read Forex Charts and Candlesticks

A forex chart plots a currency pair's price over time, and the most common type, the candlestick chart, shows four prices for each period: the open, high, low and close. A green (or hollow) candle closed higher than it opened; a red (or filled) candle closed lower. Learning to read candles and timeframes lets you see trend, volatility and where buyers and sellers stepped in, but individual candlestick "patterns" are weak evidence unless they appear in the right context.

Three ways to draw price

• Line chart: joins the closing prices. Clean and good for seeing the big trend.
• Bar chart (OHLC): a vertical bar from high to low, with a tick on the left for the open and on the right for the close.
• Candlestick chart: the same four prices drawn as a box (the body) between open and close, with thin lines (wicks or shadows) to the high and low.

Candlesticks are the most popular because the colour and body size show at a glance who won the period.

Anatomy of a candle

Part	What it shows
Body	Distance between open and close
Colour	Green or hollow if close > open; red or filled if close < open
Upper wick	From the top of the body to the high
Lower wick	From the bottom of the body to the low
Range	High − low, the total distance travelled

Timeframes

Each candle can represent one minute, an hour, four hours, a day, a week or more. The same price action looks very different on each:

Timeframe	Typical use
1 to 15 minutes	Scalping and very short day trades; much noise, costs matter most
1 hour to 4 hours	Day trading and short swings
Daily	Swing and position trading; the most widely watched
Weekly	Big-picture trend and major levels

A practical method is to use one main timeframe that matches how long you hold trades, and one higher timeframe to define the trend. A swing trader might trade the daily chart but check the weekly; a day trader might trade the 1-hour chart and check the 4-hour or daily.

When does a forex day start?

As covered in Forex Market Hours, the forex day normally closes at 17:00 New York time. Brokers whose servers run on UTC+2 (UTC+3 in the US summer) produce five clean daily candles a week. If your platform uses another time zone, you may see a small Sunday candle, and your daily highs, lows and closes will differ from other traders' charts. Indicators, levels and backtests built on daily candles depend on this choice, so keep it consistent.

Charts show the bid

Most platforms draw candles from the bid price. Your buy orders fill at the ask, which is higher by the spread. This is why a buy limit can appear to be "touched" on the chart without filling, and why a short's stop can be hit when the chart seems not to reach it. During news and at the rollover, wicks can be stretched by wide spreads rather than real trading.

Volume in forex

Spot forex has no single exchange, so no one knows the true volume traded in a given hour. The volume bars on retail platforms are usually tick volume: how many times the price changed at that broker. Research has found that tick volume tends to move with real activity, so it is useful for seeing quiet and busy times, but do not treat it as precise. Currency futures on the CME do publish real exchange volume, which some traders use as a guide.

Common candlestick patterns

A few patterns are worth recognising because many traders watch them:

• Doji: open and close almost equal. Indecision.
• Hammer: small body near the top, long lower wick (at least twice the body). Sellers pushed down and were rejected. A shooting star is the reverse.
• Engulfing: a candle whose body fully covers the previous candle's body in the opposite colour. Bullish engulfing after a fall, bearish engulfing after a rise.
• Inside bar: a candle whose high and low sit inside the previous candle's range. A pause, often before a larger move.

Patterns need context and evidence

Single-candle patterns appear constantly, and most of them lead nowhere. They become more meaningful when:

1. They form at a level that matters, such as support, resistance or a round number. See Support, Resistance and Trend.
2. They agree with the trend on the higher timeframe.
3. They appear on higher timeframes, where each candle represents more trading.
4. You have tested them on the pairs and timeframe you trade, after costs.

Practice

Open a daily EUR/USD chart and, for the last 20 candles, write down the body size, wick sizes and range in pips. Note which closed near their high or low. Then switch to the weekly chart and see how those 20 days look as four candles. This simple exercise trains your eye faster than memorising pattern names. You can view daily charts for all 28 major pairs, with their current trend state, on the forex market page.