How to Read Candlestick Charts for Beginners: Bullish and Bearish Candles Explained (Chapter 8 – Part 1)

In the earlier chapters of this course, we focused mainly on the theoretical side of forex trading.

For example, in Chapter 1 we studied what Forex is and how currency pairs work 🔗https://tradetogether.in/articles/forex-course-for-beginners-chapter-1-what-is-forex-and-how-currency-pairs-work , and in Chapter 2 we learned how trading works inside a trading account including margin, leverage, and risk 🔗https://tradetogether.in/articles/forex-trading-mechanics-lots-leverage-margin-explained .

Those chapters helped us understand how the forex market functions.

Now we are entering the practical side of trading.

To understand what is happening in the market in real time, traders need a way to see price movement clearly. This is where charts become very important.

Professional traders, banks, and institutions do not analyze the market by looking at random numbers. Instead, they study price movement visually using charts.

In this chapter, we will start learning the foundation of chart reading, which is one of the most important skills in trading.

In this chapter, you will learn the basic foundation of reading price charts.

By the end of this lesson, you will understand:

These concepts form the foundation of price action analysis, which will help you understand more advanced candlestick patterns in the next parts of this chapter.

A chart is a visual way to represent data.

Instead of reading a long list of numbers, charts help us see patterns and changes easily.

For example, imagine you want to see how the temperature of a city changed during the last week.

You could read numbers like:

25°C, 27°C, 29°C, 30°C...

But when these numbers are displayed on a chart, you can instantly see how the temperature moved up or down over time.

The same idea is used in financial markets.

In trading, a chart shows how the price of an asset changes over time.

Traders use charts to understand:

Charts allow traders to visually observe price movement and market behavior.

Charts are used in many areas such as business, research, education, and financial markets.

Some common types of charts include:

A pie chart is used to show percentages or proportions.

For example, a company may use a pie chart to show how its total budget is divided between marketing, salaries, and operations.

A line chart connects data points using a simple line.

It is often used to show how something changes over time, such as temperature changes or stock prices.

In financial markets, line charts can show the general direction of price movement.

A bar chart represents data using vertical or horizontal bars.

Each bar shows the value of a specific category.

Bar charts make it easy to compare different values quickly.

In trading, the most popular type of chart is the candlestick chart.

Unlike simple charts, candlestick charts provide detailed information about price movement during a specific time period.

Each candle shows four important prices:

This information helps traders understand market behavior, buying pressure, and selling pressure.

Charts are important because they allow traders to analyze price movement visually.

Instead of guessing where the market might go, traders study charts to understand patterns and trends.

Charts help traders:

Without charts, trading would be much more difficult because traders would only see raw numbers instead of visual price movement.

Although many types of charts exist, most professional traders prefer candlestick charts.

This is because candlestick charts provide more detailed information about price movement compared to line charts.

Candlestick charts help traders see:

Because of this, candlestick charts are widely used in forex trading, stock trading, and cryptocurrency markets.

A candle represents price activity during a specific time period.

For example:

Each candle shows four key price levels.

These are commonly called OHLC:

A candle also has two main parts:

The body represents the difference between the open and close price.

The wicks represent the highest and lowest prices reached during that time period.

Candles can show whether the price moved up or down during a time period.

A bullish candle means the price closed higher than it opened.

This shows that buyers were stronger than sellers during that time period.

Example:

If a 5-minute candle opens at 100 and closes at 105, the price moved upward during those five minutes.

This forms a bullish (green) candle.

This tells traders that buying pressure was stronger during that period.

A bearish candle means the price closed lower than it opened.

This shows that sellers were stronger than buyers during that time period.

Example:

If a 5-minute candle opens at 105 and closes at 100, the price moved downward.

This forms a bearish (red) candle.

This tells traders that selling pressure was stronger during that time period.

Understanding charts and candles is the first step toward learning technical analysis.

Charts help traders see price movement clearly, while candlesticks provide detailed information about market activity.

By learning how to read candles, traders begin to understand market behavior, buying pressure, and selling pressure.

In the next part of this chapter, we will explore more advanced candlestick patterns and how traders use them to analyze the market.