Break down candle bodies and wicks with worked prices, compare five shapes, and see why identical OHLC bars cannot reveal the order of stop and target touches.
FXCN · OHLC
Fictional EUR/USD illustration, not market data or a trading signal. Both paths share the same open, high, low and close, but reach the extremes in a different order.
A candle compresses an interval's open, high, low and close into one symbol. It describes recorded prices; it does not establish the next candle's direction. Colours are configurable, so compare open and close rather than relying on a particular red/green convention.
First identify the instrument, interval, quote source, server time zone and whether the candle has closed. The apparent close of an unfinished candle is still changing. A long wick, doji or engulfing shape seen during the interval can disappear before it ends.
This fictional one-hour EUR/USD candle assumes one pip equals 0.0001. Open means the first recorded quote in this interval, not a single worldwide forex opening price.
| Measure | Price or calculation | Interpretation |
|---|---|---|
| Open O | 1.1000 | Interval starting price |
| High H | 1.1040 | Highest recorded price |
| Low L | 1.0980 | Lowest recorded price |
| Close C | 1.1020 | Finished interval's ending price |
| Range | H − L = 0.0060 | 60 pips |
| Body | Absolute difference between C and O = 0.0020 | 20 pips; one third of the range |
| Upper wick | H − max(O,C) = 0.0020 | 20 pips |
| Lower wick | min(O,C) − L = 0.0020 | 20 pips |
The body is not the entire fluctuation. Close is only 20 pips above open, while the interval spans 60 pips. Neither number alone gives a trader's profit or loss: direction, quantity, actual entry/exit and charges are unspecified.
The diagram constructs two paths. A reaches the high before the low; B reaches the low before the high. Both start and finish at identical prices and therefore produce the same OHLC candle.
For an educational simulation only, suppose a long position already exists at the interval's start, with a target at 1.1030 and a stop trigger at 1.0990. Path A crosses the target first; B crosses the stop first. This candle cannot tell you which occurred first. Filling that gap with the favourable sequence can overstate a backtest.
This is not an executable fill simulation. Bid/ask triggers, gaps, order acceptance, execution rules and slippage have not been specified. A finer interval may reduce uncertainty, but if both thresholds occur within the same finer bar, the ambiguity remains. Use appropriate underlying quotes and order rules, rather than assuming the most profitable path.
Books and software can use different thresholds. Record the numerical definition before comparing results.
| Shape | Observable structure | What it does not establish |
|---|---|---|
| Doji | Open and close are near each other; small body | A coming reversal or lasting balance |
| Hammer | Small body near the upper range, long lower wick; often discussed after a decline | A low that cannot be broken again |
| Shooting star | Small body near the lower range, long upper wick; often discussed after a rise | Future seller dominance |
| Body engulfing | The later body contains the earlier body; direction and context are separate | That the later high/low also contains the earlier range |
| Inside bar | Later high no higher and later low no lower than the previous bar | Breakout direction or whether a breakout will persist |
Body engulfing compares opens/closes; an outside bar compares highs/lows. Do not treat them as synonyms. A hammer and hanging-man description can share geometry but refer to different preceding contexts. Neither name establishes predictive performance. Similar shapes during quiet hours and a major release do not establish comparable trading conditions.
For a labelling exercise, you might define a small body as no more than 10% of the full range. This is an illustrative exercise threshold, not a universal convention or profitable rule. Our example's body is 33.3% of range, so it does not qualify. Do not change the threshold after seeing subsequent prices.
Specify equality rules, wick ratios, how many previous bars define context and how zero-range records are handled. When H equals L, do not divide by zero: label it separately. Every input to a signal must have been available at that time; future extrema cannot be smuggled into a historical decision.
Keep these fields in a reading worksheet: instrument/contract, source, bid/ask/mid price basis, interval, time zone, start/end timestamps, closed status, O/H/L/C, definition version and missing-data flags. Retain non-matching examples as well as attractive screenshots. Selecting only successful-looking examples changes the sample.
Some charts display only one quote side. A buy and a sell use different executable prices. A line untouched on one chart does not establish that the other side never triggered an order. Another provider's chart is not automatically conclusive evidence of a pricing error.
Before claiming a pattern works, fix the identification rules and evaluate data not used to design them. Include spread, commission, financing, slippage and unfilled orders. Small samples, selecting a single regime and repeatedly tuning rules cannot support high-win-rate advertising. Without suitable evidence, the shape remains a descriptive label.
For an order dispute, use the execution-evidence guide. For position quantity, see risk budgeting and sizing. Learning chart mechanics does not require taking a live position.
Does a long lower wick reveal institutional buying? Its geometry does not identify counterparties or their motives.
Why do one-hour and four-hour shapes differ? Aggregation changes the opening/closing points and bodies. Time zones and session boundaries can also change daily bars.
Does waiting for the next close make a pattern reliable? It supplies another observation while changing timing and possible entry price. That alone is not a statistical edge.
Is the diagram a real account or backtest? No. Prices, paths and order scenarios are constructed solely to explain information limits and arithmetic.
CME Group's chart-types lesson explains the graphical representation of open, high, low and close. The paths and calculations here are independent teaching examples, not that institution's endorsement of a forex strategy.