Candles: what one candle tells you
What the four prices are, and who decides them
Each candle covers one slice of time. You choose that slice when you set the chart. A one-minute candle holds one minute of trading. A four-hour candle holds four hours. The four prices are the open, the high, the low and the close. They are taken from the prices that were actually quoted during that slice, so the candle is a record, not an opinion.
The open is the first price quoted in the slice. The close is the last price quoted before the slice ends. The high is the highest price quoted at any moment inside the slice, and the low is the lowest. On EUR/USD, these are quoted to four decimal places, so the smallest step you see is one pip. A move from 1.0850 to 1.0851 is one pip.
Your chart draws all four onto one vertical bar and colours the part between the open and the close. That coloured part is the body. The thin lines above and below it are the wicks. Nothing else on the candle carries information. Any shape you think you see is only these four numbers arranged in a picture.
Where the cost sits in a candle you have already closed
A closed candle is history. You cannot trade at its prices now. The only price you can act on is the one quoted at this moment, and that price comes with a spread. The spread is the gap between the price at which you can buy and the price at which you can sell. It varies between brokers and can widen when the market is busy or quiet.
Suppose the candle closed at 1.0864. If you buy now, you pay the asking price, which sits above the quoted middle. If you sell now, you receive the bidding price, which sits below it. That difference is a cost you pay on entry, before the market has moved at all. It is not shown on the candle.
Commission and swap are separate again. Some brokers charge a commission on each trade. Some charge a swap for positions held overnight. Others fold the cost into a wider spread. Because these terms differ, the naira cost of trading one candle's move cannot be fixed by the candle alone. Read your own account statement for the figures that apply to you.
Turning a candle's pips into naira for your own account
A pip on EUR/USD is worth 10 units of the quote currency on one standard lot. The quote currency here is the second one in the pair. That 10 is a fixed relationship, not a market forecast. It scales with your lot size. A mini lot is one tenth of a standard lot, so one pip is worth one unit of the quote currency. A micro lot is one hundredth, so one pip is worth one tenth of a unit.
To reach naira, you need the exchange rate your broker uses to convert that quote currency. That rate moves during the day, and brokers do not all use the same one. So the naira value of a 14-pip body changes from hour to hour and from broker to broker. Write the rate down beside your figure so you know what you used.
Then compare the result with your account. A 14-pip body might be small against a large balance and large against a small one. The candle does not know your balance. The same shape carries a different weight for each person reading it, which is why the number that matters is the one you calculate for your own lot size and your own account.
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.
Doing it once, step by step
You will take one candle, write down its four prices, work out the body and the wicks in pips, and then convert those pips into naira for your own lot size. Do this on paper before you place any trade.
- 01
Write the four prices
Pick one closed candle on your EUR/USD chart and note the open, high, low and close to four decimal places. Do not skip the high and the low, even if they look close to the body. These four numbers are the whole candle.
- 02
Find the body in pips
Subtract the open from the close, or the close from the open, and take the positive result. Move the decimal point four places to the right to read it as pips. A difference of 0.0014 is 14 pips.
- 03
Find each wick in pips
Subtract the close from the high to get the upper wick. Subtract the low from the open, or the low from the close, whichever is higher, to get the lower wick. Both answers are in pips using the same four-place shift.
- 04
Apply your lot size
Multiply the pips by 10 for a standard lot, by 1 for a mini lot, or by 0.1 for a micro lot. That gives the value in units of the quote currency. Note which lot size your account actually uses.
- 05
Convert to naira
Multiply the quote-currency figure by the exchange rate your broker shows for that currency against the naira. Write down the rate and the time you used it, because both change. The result is the gross value of the move.
- 06
Subtract your costs
Take off the spread, any commission and any swap that applies to your account. The spread alone may remove part of a small move. What remains is the figure to compare with your balance before you decide whether the move is large or small for you.
The mistake most 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.
Questions that come up next
How much does one candle cost me in naira?
The candle itself costs nothing. It is a record of prices that have already happened. The cost comes when you act on a price now. That price carries a spread, and possibly a commission or a swap. Because these vary between brokers, the naira cost of acting on one candle's move cannot be read from the candle. Check your own account statement for the figures that apply to you.
Why does the same candle look different on two brokers' charts?
Brokers quote slightly different prices and may round them differently. The open, high, low and close are taken from the prices each broker actually quoted during that slice of time. If the quotes differ, the candle drawn from them differs. This is normal and is one reason a candle is a record of one feed, not a universal truth.
Can I trade at the open or close price of a candle I can see?
No. A candle you can see in full is closed. Its prices are history. The only price you can act on is the one quoted at this moment. That price comes with a spread, so the price you get will not match the candle's close. The candle tells you what happened, not what you can get now.
What does a long wick tell me about cost?
A long wick means the price moved far in one direction and then came back before the slice ended. In pips, that distance can be converted to naira using your lot size. But the wick is still a record of past quotes. It does not tell you what the spread, commission or swap will be if you trade now. Those costs are separate and vary between brokers.
How do I work out the body and wicks in pips from the four prices?
Subtract the open from the close to get the body. If the close is higher, the body is positive; if lower, it is negative. The upper wick is the high minus the higher of the open and close. The lower wick is the lower of the open and close minus the low. Each result is in pips because EUR/USD is quoted to four decimal places.
Does a candle shape predict the next move?
No. A candle is four numbers drawn as a picture. Those numbers come from quotes that have already happened. They do not contain information about future quotes. Any shape you see is only the open, high, low and close arranged on a vertical bar. Treating a shape as a forecast is a common mistake.
The words used on this page
- pip
- The smallest common step in a currency price. On EUR/USD, which is quoted to four decimal places, a move from 1.0850 to 1.0851 is one pip. It is a unit of measurement, not a cost or a profit by itself.
- body
- The coloured part of a candle, drawn between the open and the close. Its height in pips is the difference between those two prices. It shows how far the price travelled from the first quote to the last within the slice.
- wick
- The thin line above or below the body. The upper wick runs from the body to the high. The lower wick runs from the body to the low. Wicks show prices that were quoted but not held until the close.
- spread
- The gap between the price at which you can buy and the price at which you can sell. It is a cost you pay on entry. It varies between brokers and can widen when the market is busy or quiet.
- lot size
- The amount of currency you are trading in one position. A standard lot, a mini lot and a micro lot are different sizes. The naira value of one pip scales with the lot size you choose.
- swap
- A charge some brokers apply for holding a position overnight. It is separate from the spread and from commission. Not all brokers charge it, and the amount varies, so check your own account statement.
What to take away
- A candle is four prices for one slice of time: open, high, low and close.
- The body is the distance from open to close. The wicks reach to the high and the low.
- A closed candle is history. The price you can act on now carries a spread, and possibly commission or swap.
- Convert pips to naira using your lot size, then check your own statement for the costs that apply to you.