Candles: what one candle tells you
What you learn in 3 minutesThis lesson shows what a single candle on a chart is made of, and why that matters to your money. A candle holds four prices for one slice of time: the open, the high, the low and the close. On EUR/USD, a move of one pip is worth 10 units of the quote currency on one standard lot, so the shape of a candle can be turned into naira once you know your lot size. Nothing here is a signal or a promise. It is just how the four numbers are drawn.
One candle, four prices, one naira cost
| Step | Amount | Note |
|---|---|---|
| Open | 1.0850 | the first price of the period |
| High | 1.0872 | the highest price in the period |
| Low | 1.0841 | the lowest price in the period |
| Close | 1.0864 | the last price of the period |
| Body size | 14 pips | close minus open: 1.0864 minus 1.0850 = 0.0014 |
| Upper wick | 8 pips | high minus close: 1.0872 minus 1.0864 = 0.0008 |
| Lower wick | 9 pips | open minus low: 1.0850 minus 1.0841 = 0.0009 |
| Value of the body on one standard lot | ₦140 | 14 pips x 10 units of quote currency per pip, converted at the current rate |
The exact naira figure moves with the exchange rate your broker uses. A broker may also add a spread, a commission or a swap, and may round the price. Check your own account statement for the numbers that apply to you.
The mistake people make here
The common mistake is to look only at the body and ignore the wicks, or to treat a long candle as a sign of what happens next. A candle is a record of four prices, not a forecast. Instead, write down the open, high, low and close, then work out the body and the wicks in pips. Convert those pips into naira using your lot size before you decide whether the move is large or small for your account.Check yourself
On EUR/USD, a candle opens at 1.0850 and closes at 1.0864. What is the body size in pips, and what is it worth on one standard lot?
Body = 1.0864 minus 1.0850 = 0.0014, which is 14 pips. On one standard lot, 14 pips x 10 units of quote currency per pip = 140 units of the quote currency, converted to naira at the current rate.
The same candle has a high of 1.0872. What is the upper wick in pips?
Upper wick = 1.0872 minus 1.0864 = 0.0008, which is 8 pips.