Recently, a friend asked me how to read candlestick charts, and I realized that many beginners actually only have a superficial understanding of candlestick patterns. Instead of memorizing various formations by heart, it's better to truly understand the logic behind candlesticks, so you can respond flexibly to the market.

Speaking of candlestick charts, they essentially condense four prices over a period of time into one bar—opening price, highest price, lowest price, and closing price. The rectangular part is called the real body, and the thin lines above and below are called shadows or wicks. The color of the real body represents the balance of buying and selling forces; if the closing price is higher than the opening price, it's an upward move, otherwise it's a decline. Different platforms have different color conventions; in US stocks, green usually indicates an increase and red a decrease, so be aware of that.

When I first started trading, my biggest mistake was memorizing various candlestick patterns like hammer, hanging man, inverted hammer... but honestly, there's no need to memorize them. As long as you understand what the position of the closing price and the length of the real body represent, you can deduce the market's strength and weakness. For example, a red candlestick with no upper or lower shadows indicates that buyers have been in control throughout, with no resistance from sellers; conversely, a candlestick with long shadows on both ends shows a tug-of-war between bulls and bears, and the market hasn't decided a winner yet.

Choosing between daily, weekly, or monthly candlesticks is also crucial. For short-term trading, daily candlesticks are enough, as they show daily fluctuations. But if you're a long-term investor, daily charts don't reveal much; in that case, weekly or monthly charts can show the true trend. I usually look at multiple timeframes simultaneously—use daily for short-term trades, weekly for medium-term judgments, and monthly for long-term positioning.

The most practical method for reading candlestick charts involves just three steps. First, identify the high and low points of the wave, and determine the trend direction—higher highs and higher lows indicate an uptrend; lower highs and lower lows indicate a downtrend; if the highs and lows are roughly the same, the market is consolidating. Second, compare the length of the real body and shadows to judge the strength of buyers and sellers. Third, combine support and resistance lines to predict possible reversal points.

Predicting reversals is the hardest but also the most profitable. My experience is to wait until the price approaches key support or resistance levels, then observe whether the candlestick real body shrinks and the trend weakens, and confirm with volume and other indicators. If the candlestick shifts from green to red or vice versa, and the real body enlarges at the same time, it often signals a reversal. But be cautious of false breakouts—many people get caught chasing high and end up trapped.

There's also a subtle detail that's often overlooked: when the wave's lows gradually rise and the price gets closer to resistance, this isn't a selling point; rather, it indicates that buying strength is increasing. Traditional traders might see this and want to short, but that's the wrong approach. Conversely, when momentum decreases significantly and overbought or oversold conditions appear, the market is more likely to reverse.

Honestly, understanding candlestick charts isn't mysterious; it just takes more observation and practice. No need to memorize patterns by heart—understanding the logic is most important. Every time you look at a candlestick, ask yourself three questions: Where is the closing price? What do the length of the real body and shadows tell you? What's the trend of the wave? If you can answer these, you'll be able to grasp the market's rhythm.