CADET · Module F01: Your First Steps · About 25 minutes
Big idea: A candle describes what already happened during a period of time. It cannot tell you the future.
Your mission today
Learn the four prices inside one candlestick, recognise the body and thin lines, and explain a green candle and a red candle using normal words.
1. Why does a chart show candles?
Imagine you are watching a market for one hour. Its price changes many times. Instead of showing every little update, a candlestick packs that hour into one picture.
Each candle has four important numbers. Traders shorten these to OHLC, but let's use their full names first:
- Open: The first price in that time period.
- High: The highest price reached during that period.
- Low: The lowest price reached during that period.
- Close: The last price in that period.
A candle is basically a four-number story about a period of time.
2. Build a candle together
Let's invent a one-hour example. At the start of the hour, the price is $100. During the hour it reaches $107 at its highest and $98 at its lowest. At the end of the hour it is $104.
Our four numbers are:
OPEN $100 · HIGH $107 · LOW $98 · CLOSE $104
The close ($104) is above the open ($100). Many chart apps colour this candle green. This means the price finished higher than it began during that hour, not that everyone made money or that the next hour will rise.
Notice that the price went as low as $98 even though it finished at $104. The candle tells us the high and low, but not the exact order in which those two prices happened.
3. The body and the wicks
The body is the thick middle part. It stretches from the open to the close. When the close is higher than the open, it is usually green. When the close is lower, it is usually red. Colour schemes can vary.
The thin line above the body is the upper wick. It reaches up to the high. The thin line below the body is the lower wick. It reaches down to the low. Some people call them shadows. Same idea.
A red candle example could be Open $104, High $106, Low $97, Close $99. The price finished $5 below where the candle began. That says what happened during this one period, not what will happen next.
4. Time setting changes the meaning
A green candle on a five-minute chart describes only five minutes. A green candle on a daily chart describes a trading day or session. Before discussing a candle, always check the chart's time setting.
A candle that is still forming may change colour before the time period ends. That is why we distinguish a completed candle from one that is still moving. If you look at a candle before it finishes, its close is not final yet.
5. What a candle does NOT tell you
One green candle does not guarantee the next candle will be green. A long wick does not automatically mean a reversal. Candles do not reveal why every person traded, how many people earned money, or the exact path price followed inside the period.
At Cadet level, your job is to describe, not predict. “The hour opened at $100 and closed at $104” is a good observation. “This proves the market will shoot higher” is not.
Practice mission
Draw two candles from these imaginary numbers:
- Candle A: Open $50, High $56, Low $48, Close $54.
- Candle B: Open $54, High $55, Low $45, Close $47.
Mark the body, upper wick and lower wick. Which is generally green? A. Which is generally red? B. Which one has the lower close? B.
Before your next lesson
You should be able to name the open, high, low and close on a picture and explain what the body and wick show.
Next module: How a practice trade starts, ends and changes your account balance.
