✅ Lesson 2.1 – Candle Anatomy and Meaning

Learn how candlestick structures reveal trader sentiment and signal future price movements.

🧭 Introduction to Candlestick Analysis

Understanding candlesticks is essential for interpreting market psychology. A candlestick not only shows where price has been, but also gives clues about potential direction, especially around key support and resistance levels.

Candlestick charts can help traders:

• Identify buying/selling pressure

• Spot possible reversals or continuations

• Make smarter entry and exit decisions

🔍 What is a Candlestick?

Each candlestick represents price movement over a specific time frame (e.g., 1 minute, 1 hour, 1 day).

A single candle provides four key data points:

• Open – The price at the beginning of the time period

• High – The highest price reached

• Low – The lowest price reached

• Close – The price at the end of the time period

🧱 Parts of a Candle

• Body (Real Body):
  The range between the opening and closing prices.

  • Green Body → Price closed higher than it opened (bullish)

  • Red Body → Price closed lower than it opened (bearish)

• Wick (or Shadow):
  The thin lines above and below the body.

  • Upper Wick → High of the session

  • Lower Wick → Low of the session

  • If missing, the open or close was also the high or low

🕯️ Candles without wicks are called “full body candles” and indicate strong directional pressure.

⏱️ Time Frame Examples

• A 1-minute candle shows price action for one minute

• A daily candle shows the full trading activity of a single day

🧠 How to Read Candlestick Behavior

📉 Long Wicks + Small Body

• Signals indecision in the market

• Buyers and sellers fought for control, but price closed near where it started

• Common in Doji candles and may suggest reversal or trend exhaustion

Example: Doji

• Little to no body

• Long wicks on either side

• Reflects a market that’s pausing or unsure

🔁 Potential Reversal

If seen after a strong trend, long wicks and short bodies often signal a shift in momentum.

📈 Long Body + Small or No Wick

• Indicates strong, decisive movement

• Little opposition from the other side (buyers or sellers)

• Suggests trend continuation

Example: Bullish/Bearish Marubozu

• Very long green or red body

• No wicks → Strong conviction in direction
  

🔨 Special Reversal Patterns

✅ Hammer (Bullish Reversal)

• Small body at the top

• Long lower wick

• Appears after a downtrend

• Indicates buyers regained control after strong selling

⚠️ Hanging Man (Bearish Reversal)

• Same structure as hammer

• Appears after an uptrend

• Signals potential weakness or trend reversal
  

📘 Lesson Summary

• Candlestick anatomy helps you interpret market psychology at a glance

• Wicks show volatility and indecision

• Bodies reveal buying/selling strength

• Look for context (trend direction, support/resistance) when interpreting candles

📘 In the next lesson, we’ll explore common candlestick patterns and how they’re used in real trading strategies.