Reading a candlestick chart
A candle is four numbers drawn as a shape. Knowing which four, and which information was thrown away to draw it, is most of chart literacy.
Candlesticks are the default way price is displayed, and they are simpler than they look. Each one summarises a period of time using four numbers.
The four numbers
Open — the price at the start of the period. Close — the price at the end. High and low — the extremes reached in between.
The thick body spans open to close, and its colour says which way round they were. The thin lines above and below — wicks, or shadows — reach to the high and the low. A long upper wick means the price got there and did not stay, which is genuinely informative: buyers pushed and sellers pushed back harder.
Everything else about the period is discarded. The order in which the moves happened, how long the price spent at each level, how many trades it took — none of that survives. A candle with the same four numbers looks identical whether the period was calm or chaotic.
The candle is a summary, and summaries lose things
Two completely different half-hours can produce the same candle. The shape is not a recording of what happened; it is four measurements of it.
The timeframe is a choice, and it changes everything
A candle can cover a minute, an hour, a day or a week. The same price history looks like a crash on one timeframe and a pause on another, and neither is the true picture — they are different levels of compression.
This matters more than it sounds, because a great deal of confident chart commentary consists of choosing the timeframe on which a claim happens to look strongest. Whenever you see a chart making an argument, check what period each candle covers and where the visible window starts.
Volume
Usually shown as bars beneath, volume is how much traded in each period. It adds a dimension the price alone lacks: whether a move involved many participants or few.
Treat it carefully. On a regulated exchange volume is reasonably meaningful. Elsewhere it can be manufactured — one party trading against itself produces bars indistinguishable from genuine interest, and there is a whole industry doing exactly that.
What a chart can and cannot tell you
It can tell you where the price has been, how violently it has moved, and roughly where a lot of trading occurred. That last one is real information — levels where a great deal changed hands are levels where a great many people have a decision pending.
It cannot tell you what happens next, and it contains no information about the thing being priced: what the network does, who uses it, whether the company holding it is solvent. A chart of a fraud and a chart of a functioning asset are the same kind of picture.
Where the evidence stands on patterns
Named formations — head and shoulders, flags, triangles — are widely taught and their predictive value is contested rather than established. Studies find weak and inconsistent results, and the honest summary is that no pattern has been shown to give an ordinary trader a reliable edge after costs. Anyone certain about this in either direction is going further than the evidence.
Why learn it at all, then
Because it is the shared language. Every platform draws these, every discussion assumes them, and being unable to read one leaves you dependent on other people's descriptions of what a chart shows.
Read it as a record with known gaps, and the literacy is useful. Read it as a forecast, and you have joined a very large group paying fees for the privilege.