What candlesticks mean on the chart and how to read market sentiment

A candlestick chart is one of the key tools of technical analysis in the crypto world. It not only lets you track price changes but also understand market sentiment and participants’ actions. Each individual candle reflects how, at a specific moment, the balance of power between buyers and sellers was distributed, and who gained the upper hand in the price movement.

In this article, you will learn:

• what a candle is in trading and how it is structured;
• how to identify a trend by candles and what types there are;
• how to read a candlestick chart and avoid mistakes in analysis.

This article continues the series on technical analysis. If you haven’t read “Technical Analysis: How to Read Charts and Find Entry Points,” start with it to better grasp the basics of technical analysis.

The chart displays the dynamics of quotations over a chosen interval, from one minute to an entire week. This representation of data makes it possible to quickly capture the overall situation and determine who was stronger on the trading venue during this period — those who buy or those who sell.

Each chart element is formed from four key values. They record the opening quotation, the peak point, the lower boundary, and the final level. Together these parameters form the OHLC structure and make it possible to assess the vector and strength of fluctuations. When the final mark exceeds the initial one, buyers take the upper hand on the venue. In the opposite situation, sellers seize the initiative.

Color coding simplifies the perception of rising and falling quotations. Green indicates a price increase, red signals a decrease. Some exchange platforms use white and black instead, but the essence does not change. The size of the body shows the strength of the move. The greater the difference between the opening and closing prices, the more active the participants and the higher the volatility. On daily charts, large figures usually appear when significant events are published, as the trading venue responds with heightened emotionality.

A candlestick figure conveys the current market picture and shows the balance between the desire to buy and to sell an asset. Its configuration allows you to notice where buyers are strengthening positions and where sellers begin to put pressure on the price. That’s why candles are perceived as one of the most understandable and informative ways to study price dynamics.

The graphical figure is formed from a central body and protruding lines by which a market participant assesses the mood of the trading venue.

• The body shows the interval between the opening and the final quotation within the set timeframe. When the candle’s body is elongated, it indicates that the price moved confidently in one direction. At such times one side — buyers or sellers — gains the advantage and controls the market’s movement. A compressed body indicates sluggish involvement and an unclear situation when neither side managed to gain the upper hand.
• Shadows (wicks) show the extreme values the quotation reached within the time segment. Long tails indicate high variability and opposition among players. The price could sharply deviate from the main range but by the final fix returned to its initial positions. Short tails indicate a more moderate and stable dynamic without sharp swings.

The opening and final quotations allow you to assess the balance between the desire to acquire and to sell the asset. Finishing the period above the initial mark demonstrates the strength of buyers (bulls) and a rise in interest in the instrument. Printing below the starting level indicates that sellers (bears) gained the advantage and pressure on the price increased.

For correct interpretation, you must consider not only the configuration of the individual element but also its placement on the chart. You should analyze in which zone the formation occurred, which support and resistance levels are located nearby, and how the figure relates to previous fluctuations. The combination of these factors helps you understand who is exercising control over the market at the moment.

One candle reflects only part of the market move, while a candlestick pattern shows the overall direction and market sentiment. A sequence of several bars helps you understand who is currently stronger — buyers or sellers. When several green candles appear in a row, it indicates growing interest and increasing demand. If red candles prevail, the market is under seller pressure and buyers’ strength is declining.

The size of bodies and shadows helps determine how sustainable the trend is. Long bodies with short shadows show a confident move; short bodies with long wicks indicate indecision and a search for equilibrium. During such periods, the market oscillates and may be preparing for a breakout or a reversal.

When a sequence of same-color candles persists for a long time, the trend is considered more sustainable. A sudden opposite-color candle, especially near a support or resistance level, often becomes the first signal of a change in direction.

Experienced traders always analyze context, because it is exactly what helps distinguish a temporary correction from the start of a new move.

Reading candles for beginners starts with understanding their main types and the signals they convey. Each form reflects market sentiment and helps determine who is currently stronger — buyers or sellers.

Candles help you understand who controls the market and how sustainable the move is. It’s important to analyze not a single candle but the bigger picture. If a long green candle appears after a period of decline, it may indicate demand recovery. If it appears after growth, it means market participants are starting to take profits and the move may weaken.

Candlestick patterns help identify market participants’ sentiment and a possible change in the direction of price movement. They are formed by a combination of bodies and shadows and are often used as hints when choosing a moment to enter or exit a trade.

A Doji candle (Doji) shows a state of uncertainty when the opening and closing prices are almost equal. This figure reflects balance between buyers and sellers and often appears during a pause before a new impulse. The longer the doji shadows, the stronger the confrontation in the market and the higher the probability of an imminent move to one side.

A Hammer candle (Hammer) forms after a period of decline and indicates a possible reversal upward. This model has a short body and a long lower shadow, which shows that sellers tried to push the price down but buyers managed to bring it back above the opening level. The signal becomes more reliable if the hammer appears near a support level and is accompanied by rising volumes.

A Hanging Man (Hanging Man) appears after an uptrend and warns of declining buyer activity. Externally it resembles a hammer but forms in the upper part of the chart. The long lower shadow suggests that sellers have begun taking profits, which can be the first sign of an approaching reversal.

An Engulfing candle (Engulfing) indicates a trend change when a large candle completely overlaps the body of the previous one. After a decline, the bullish variant of the pattern may signal the start of growth. The bearish variant, appearing after a prolonged rise, indicates that sellers are increasing pressure and are ready to seize control.

A Long-Legged Doji reflects strong price swings without a defined direction. This figure often appears during news events or periods of elevated volatility and shows that the market has not yet chosen a direction.

Reversal candlestick signals help you better understand market behavior, but you shouldn’t rely on them alone. They become more reliable if they coincide with support and resistance levels, trading volumes, or technical indicator readings.

A candlestick signal shows a probable development of events but does not guarantee the result. Experienced traders use such models as part of an overall strategy and make decisions only after confirmation from other analytical tools.

Each candle on the chart reflects price movement over a specific period called a timeframe. On a chart with a 1D interval, one candle shows a day; on 1H — an hour; on 5m — five minutes. The choice of timeframe determines how detailed the price movement appears and how reliable trading signals will be.

On short timeframes, the market looks more active, but such intervals often contain market noise and false breakouts. This happens due to reactions to news or the actions of scalpers who execute many quick trades. Signals from short timeframes must be verified against higher-timeframe charts.

Experienced traders use multi-timeframe analysis. The daily chart helps identify the overall trend, the hourly shows a suitable entry moment, and the five-minute helps refine the trade point and set a stop-loss. This approach makes it possible to see the market holistically and reduces the risk of impulsive decisions.

The higher the candle’s timeframe, the more reliable the signal. On daily and weekly charts, trends are confirmed by time and volume, so they carry more weight for a strategy. Short intervals are better used to refine entries rather than to react emotionally to every price move.

Candles and market sentiment are closely connected, because it’s precisely by the form and placement of candles that you can understand how participants act and where the price is moving. However, their signals need confirmation by other tools. Before entering a trade, it’s important to consider the context — the place where the candle appeared, the proximity of support or resistance levels, and trading volume data.

A candle with a long lower shadow near a support level often indicates buying and a possible reversal if it’s accompanied by rising volume and the price holds above the level. Without such confirmations, the signal remains weak, so context analysis always plays a decisive role.

Candlestick analysis of cryptocurrencies brings results only when combined with other methods of technical analysis. A combination of levels, trendlines, indicators, and volumes helps filter out false signals and more accurately assess how ready the market is for a new move.

In the following articles of the series, we will discuss how to combine candlestick analysis with levels and indicators so that signals become more precise and trading decisions more substantiated.

Candles on a cryptocurrency chart are a universal tool that helps reveal the balance of power between buyers and sellers. Understanding the form of a candle and its context allows you to choose more precise entry and exit points. Any signal received should be confirmed by other elements of analysis, such as a level, volume, or the direction of the trend.

Candles cannot predict the future, but they show how the price move has unfolded and allow you to spot changes in advance that may lead to a new impulse in the market.