Loading
Market Intelligence › Basic Terminologies
Candle, wick, gap, breakout, fakeout — what a chart says without any indicator
Published by The Retail Trader · AUG 02, 2026 · Price Action
Price action means reading the chart as it is — without indicators, only candles, levels and moves. Every candle is a small story: at what price the session opened, how far buyers took it, where sellers caught it, and at what price the fight ended. These are the words of that story.
A candle holds four numbers, and that is all:
• Candlestick — A price summary of one time period: open, high, low, close. A 5-minute candle is the whole story of 5 minutes.
• OHLC — Open (the start), High (the highest), Low (the lowest), Close (the end). Every candle shows these four numbers.
• Body — The thick part between the open and the close. A big body means one side had strong control.
• Wick / Shadow — The thin line above and below the body, reaching to the high and the low. A long wick means price went there but could not hold.
• Bullish Candle — The close is above the open. Usually green on screen.
• Bearish Candle — The close is below the open. Usually red.
• Timeframe — How much time one candle covers: 1 min, 5 min, 15 min, 1 hour, daily, weekly.
• Range — The candle's high minus its low. Days with a big range have more volatility.
• Tick — The smallest possible change in price; a candle is built from these small moves.
Some shapes appear again and again, so they got names. Remember: a pattern is only a hint, not a guarantee.
• Doji — The open and the close are almost equal. It means both buyers and sellers are tired — indecision.
• Hammer — A small body at the top and a long wick below. Sellers tried to push it down, and buyers brought it back.
• Shooting Star — The reverse of a hammer: a small body at the bottom and a long wick above. Price went up and got rejected.
• Marubozu — Almost all body, with next to no wick. Clean control by one side.
• Spinning Top — A small body with wicks on both sides. A signal of range and confusion.
• Bullish Engulfing — One big green candle that completely covers the previous red candle.
• Bearish Engulfing — One big red candle that completely covers the previous green candle.
• Harami — A small candle that stays inside the previous big candle. Momentum is slowing.
• Tweezer Top / Bottom — Two candles with almost the same high (or low). A level is being rejected again and again.
Several candles together form shapes that have their own names:
• Double Top — Going up to the same level twice and falling back; it looks like an M.
• Double Bottom — Falling to the same level twice and rising back; it looks like a W.
• Head and Shoulders — Three peaks where the middle one is the highest, with a neckline forming below.
• Triangle — The range slowly narrows (ascending, descending or symmetrical). Preparation for a big move.
• Flag / Pennant — After a sharp move, a small sideways rest, and then the same direction continues.
• Wedge — Both trendlines slanting the same way, with the range getting smaller.
• Cup and Handle — A rounded bottom followed by a small pullback — the shape of a breakout after a long consolidation.
• Rectangle / Range — Price keeps moving back and forth between two clear levels.
Now the words that appear in every trading conversation — misunderstanding them costs the most:
• Trend — The overall direction of price. If it is going up, it is an uptrend; if down, a downtrend.
• Sideways / Range — Neither up nor down; price is moving inside a band.
• Pullback — A small temporary move against the trend. A small dip within an uptrend is normal.
• Retracement — The same pullback, usually measured in percentage (for example, 38% of the move coming back).
• Reversal — The trend actually turning around, not just pausing.
• Breakout — Price moving out above an important level, usually with volume.
• Breakdown — The same thing in the downward direction: support breaking.
• Fakeout / False Breakout — The level breaks, everyone enters, and price immediately comes back inside. The most common trap for retail traders.
• Retest — After a breakout, price comes back to the same level to check whether it has now become support.
• Gap Up / Gap Down — Today's open is well above or below yesterday's close. Often because of news or global cues.
• Gap Fill — Price comes back and covers the empty area of the gap.
• Consolidation — The resting period after a move, where price gathers energy.
• Momentum — The speed of a move. A price rising fast has strong momentum, a sluggish move has weak momentum.
• Whipsaw — Price jerking in both directions, in which stop losses get hit on both sides.
• Impulse vs Correction — An impulse is a fast move in the direction of the trend; a correction is a slow move against it.
• Confirmation — The condition you ask for before taking a trade, such as a candle closing above a level.
Some patterns are formed by two to three candles together. You do not need to memorise them separately — the logic is the same: one side's control is slipping.
• Morning Star — A fall, then a small indecision candle, then a strong green candle. A three-candle bottom formation.
• Evening Star — The opposite, a three-candle formation that forms at a top.
• Three White Soldiers — Three strong green candles in a row, each closing above the previous one.
• Three Black Crows — Three strong red candles in a row. The aggressive version of a trend change.
• Piercing Pattern — A red candle followed by a green candle that closes above its midpoint.
• Dark Cloud Cover — The opposite: a green candle followed by a red candle that closes below its midpoint.
• Hanging Man — A hammer-like shape, but at the top of an uptrend. Same shape, different location, different meaning.
• Dragonfly Doji — A long lower wick, with the open and close at the top. Strong rejection from below.
• Gravestone Doji — A long upper wick, with the open and close at the bottom.
• Inside Bar — The whole candle stays within the previous candle's range. The market is pausing to think.
• Outside Bar — The whole candle extends beyond the previous candle's range on both sides. Volatility has expanded.
• Pin Bar — A candle with one long wick that touched a level and got rejected.
• Rising / Falling Three Methods — Three small opposite candles in the middle of a big move, and then the same trend continues.
There are several ways to display the same data, and each way highlights something different:
• Line Chart — A line connecting only the closing prices. The least noise, and also the least detail.
• Bar Chart (OHLC) — One vertical bar per period, with a tick on the left for the open and on the right for the close.
• Candlestick Chart — The same data, but with a body and wicks. The most widely used in India.
• Heikin Ashi — Averaged candles that show the trend smoothly. Remember: the prices shown on it are not actual traded prices.
• Renko — A new brick forms only on a fixed price move; time plays no role.
• Point and Figure — A chart of X and O that records only meaningful price moves.
• Linear vs Log Scale — On linear, an equal rupee move looks equal; on log, an equal percentage move looks equal. When viewing long history, the log scale gives the right picture.
• Price Scale / Time Scale — The axes on the right and bottom of the chart, which you can drag to change the zoom.
• Auto Fit — The scale adjusting itself automatically to the visible candles.
• Bar Replay — Practising by playing history forward candle by candle, without seeing the result ahead.
• Comparison / Overlay — Superimposing two symbols on one chart to see relative performance.
This is the whole game of price action: the candle tells you what happened, and its location tells you why it matters. The next journal is about that location — market structure.
This journal is for educational purposes only — it is not a buy or sell recommendation. Look at every term on your own chart, because that is the only way it sticks.