Candles: what one candle tells you
What you learn in 3 minutesOne candle on a chart holds four prices for a fixed slice of time: the open, the high, the low and the close. Everything you see in its shape comes from those four numbers and nothing else. Read them correctly and you can describe what happened in a market without guessing, which is the first step before any cost in KSh is worked out.
Four prices on one EUR/USD candle
| Step | Amount | Note |
|---|---|---|
| Open | 1.0850 | the price at the start of the chosen time slice |
| High | 1.0870 | the highest price reached during the slice |
| Low | 1.0840 | the lowest price reached during the slice |
| Close | 1.0860 | the price at the end of the slice |
| Body | 1.0850 to 1.0860 | the open and the close, 10 pips apart |
| Upper shadow | 1.0860 to 1.0870 | the close up to the high, 10 pips |
| Lower shadow | 1.0840 to 1.0850 | the low up to the open, 10 pips |
| Value of one pip on one standard lot | KSh 1,300 | 10 units of the quote currency, converted at the rate used here |
Brokers differ in how they round prices, whether they add a commission and what conversion rate they use for the shilling, so the KSh figure will vary between them.
The mistake people make here
The common mistake is to treat the body as the whole story and ignore the shadows. A candle can close higher than it opened and still show that price went well below the open during the same slice, and that lower shadow is part of what happened. Read all four numbers in order: open, high, low, close. Then describe the shape from those numbers rather than from memory of the colour.Check yourself
A candle opens at 1.0850, reaches a high of 1.0880, falls to a low of 1.0830 and closes at 1.0860. How many pips long is the body, and how many pips long is the upper shadow?
The body runs from the open to the close: 1.0860 minus 1.0850 is 10 pips. The upper shadow runs from the close to the high: 1.0880 minus 1.0860 is 20 pips.
On one standard lot of EUR/USD, one pip is worth 10 units of the quote currency. If those 10 units convert to KSh 130, what is the body of the candle above worth in KSh?
The body is 10 pips. 10 pips multiplied by KSh 130 per pip is KSh 1,300. That is the movement shown by the body alone, before any spread, commission or conversion charge a broker may add.