Candles: what one candle tells you
What you learn in 3 minutesThis lesson is about one candle on a price chart. A candle is a picture of four numbers for one slice of time: the open, the high, the low and the close. The body of the candle shows the distance between the open and the close. The thin lines above and below, called wicks or shadows, show the high and the low. If you can read those four numbers, you can read any candle on any chart, whether the chart is of AUD/USD or anything else.
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.
The mistake 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.