How to Read Candlestick Charts: Learn Bullish/Bearish Candles and 3 Must-Know Patterns in 5 Minutes

Do you open the exchange app, stare at the red-green bars across the screen, and completely don’t know how to judge price trends? Others say “bullish candle means up, bearish candle means down,” but you can’t even tell which is bullish and which is bearish. Don’t worry — this is written for the absolute beginner. 5 minutes, from “can’t read” to “can judge.”

One Candlestick Contains 4 Prices: Open, Close, High, Low

A candlestick (also called Candlestick chart) is one bar that records 4 key prices within a time period:

• Open price: The price at the start of this time period
• Close price: The price at the end of this time period
• High price: The highest transaction price during this time period
• Low price: The lowest transaction price during this time period

The bar’s body spans from open to close; the thin lines extending up and down (wicks/shadows) point to the high and low prices.

Real example: BTC on June 15, 2025, opened at 101,200 USDT, closed at 103,800 USDT, reaching 104,500 high and 100,600 low. This candlestick’s body spans from 101,200 to 103,800, upper wick extends from 103,800 to 104,500, lower wick extends from 101,200 to 100,600. One bar tells the entire day’s price story.

Bullish and Bearish Candles: Color Is More Important Than Direction

Chinese exchange conventions are opposite to US stock markets:

• Bullish candle (Red in Chinese exchanges): Close > Open → price rose. Body is red, bottom is open price, top is close price.
• Bearish candle (Green in Chinese exchanges): Close < Open → price fell. Body is green, top is open price, bottom is close price.

⚠️ Note: International platforms (like TradingView default) show bullish as green and bearish as red — colors are reversed. When first using international platforms, don’t mix them up. We suggest changing color settings to “Chinese convention” (red=up, green=down) to avoid misreading signals.

Practical judgment steps:

1. Check body color → Red = rise (bullish), Green = fall (bearish)
2. Check body length → Long body = strong rise/fall force, short body = small fluctuation
3. Check wick length → Long upper wick = resistance above, long lower wick = support below

Pattern 1: Hammer — Bottom Reached, May Rebound

Hammer pattern characteristics:

• Very small body, at the top of the candlestick
• Very long lower wick, at least 2x the body length
• Almost no upper wick or very short
• Appears after consecutive declines

Signal meaning: When price drops to a certain level, seller power exhausts and buyers start counterattacking. The longer the lower wick, the stronger buyer force pulling price back from lows.

Real case: In May 2025 BTC dropped from 108,000 to 92,000 area, on June 1 a hammer appeared — opened 93,200, lowest 89,800, closed 93,500. Lower wick was 3,400 USDT long, body only 300 USDT. BTC subsequently rebounded from 93,500, returning to 106,000 within two weeks.

Practical usage:

• Hammer only has meaning at the end of a downtrend — appearing during an uptrend doesn’t count
• Hammer is a reversal signal, not a confirmation signal — wait for the next bullish candle to confirm before entering
• Single hammer has limited force; 2-3 consecutive hammers produce a stronger signal

Pattern 2: Doji — Unclear Direction, Wait and Watch

Doji pattern characteristics:

• Open and close prices are nearly identical, body is extremely small or just a horizontal line
• Both upper and lower wicks present, varying lengths
• Long-legged Doji (both wicks very long) indicates fierce battle between bulls and bears

Signal meaning: Buyer and seller forces are nearly balanced, price has no clear direction. If a Doji appears after a notable rise or fall, it often means the trend may turn.

Real case: In March 2025 ETH rose consecutively from 2,800 to 3,600, on March 20 a Doji appeared (open 3,580, close 3,582, high 3,650, low 3,500). ETH then didn’t continue rising but oscillated between 3,500-3,600 for a week, then began declining to 3,200.

Practical usage:

• Doji itself doesn’t predict direction — it tells you “currently hesitating”
• Doji at uptrend top → possibly peaked, consider reducing position
• Doji at downtrend bottom → possibly bottomed, but needs next bullish candle to confirm
• Doji in oscillation middle → no signal value, ignore

Pattern 3: Engulfing Pattern — Strongest Reversal Signal

Engulfing Pattern consists of two candlesticks:

Bullish Engulfing (appears after decline):

• 1st candle is bearish (fell)
• 2nd candle is bullish (rose), and the bullish body completely wraps the previous bearish body
• Bullish open price is below bearish close, bullish close is above bearish open

Bearish Engulfing (appears after rise):

• 1st candle is bullish (rose)
• 2nd candle is bearish (fell), and the bearish body completely wraps the previous bullish body

Real case: In April 2025 SOL dropped from 200 to 140 area, April 10 bearish close 142, April 11 bullish open 138 (below 142), close 162 (above previous open 146). Bullish body completely engulfed the bearish body — bullish engulfing appeared. SOL subsequently rose from 162 all the way to 210.

Practical usage:

• The 2nd candle’s body must completely wrap the 1st — even a tiny gap doesn’t count
• Engulfing only has reversal meaning at trend ends — meaningless in oscillation zones
• Longer bullish/bearish body = stronger signal
• After bullish engulfing confirmation, consider light position entry, stop-loss at engulfing candle’s lowest point

3 Practical Tips for Beginners Reading Candlesticks

1. Look at larger timeframes first, then smaller ones First check daily charts (1 candlestick = 1 day) for big trends, then 4-hour or 1-hour charts for entry points. Small timeframe signals must obey large timeframe — if daily is declining, don’t rush into longs just because a hammer appears on 1-hour.

2. Single candlestick signals are weak; combined signals are reliable One hammer might just be random volatility, but hammer + next-day bullish confirmation = much higher credibility. Always wait for confirmation — don’t rush in the moment a signal appears.

3. Candlesticks are one tool, not a万能钥匙 Candlesticks help you read price behavior but can’t predict the future. They tell you “who has stronger buying/selling power right now,” not “what exact price tomorrow will reach.” Combine with volume (bar chart below candlesticks — taller bars = more active trading) for higher accuracy.

Summary and Next Steps

Candlestick charts aren mystical — they simply draw 4 prices within a time period using one bar. Bullish (red in Chinese convention) means rise, bearish (green) means fall, Chinese color convention is opposite to international — figure this out and you won’t misread. Hammer is a bottom reversal signal, Doji is hesitation signal, Engulfing is the strongest reversal signal. Remember: all patterns need next candlestick confirmation; single signals aren’t reliable enough.

You’re a retail trader without whale information advantages, but you have the right to learn tools. Candlestick charts are the fairest information available to retail traders — whale actions ultimately leave traces on candlesticks. Learning to read candlesticks means learning to read whale footprints.

Next step: open Gate.io’s BTC daily chart and identify bullish, bearish candles and three patterns one by one against this article. Seeing 10 theories isn’t as good as seeing 1 live chart. Register on Gate.io through the Dimen Trading exclusive link → https://www.gateport.business/share/demonjaw — after registering, you can freely view all coins’ candlestick charts with zero barrier for hands-on practice.