How to Read Price Action? The Story Candlesticks Tell

Have you ever looked at a single candlestick and wondered about the battle it represents? Every candle on your chart is a snapshot of market psychology, a moment where buyers and sellers clash, trying to tip the balance in their favor. But the real magic happens when we pair price action with volume. That’s when the true story of the market unfolds.

If, you haven’t read previous article “The Introduction of Candlestick” take a step back and know what exactly can a single candlestick tell us?

Breaking Down a Candlestick: More Than Just Open and Close

Look at any candlestick, and you’ll see seven key elements:

1. Open price
2. High price
3. Low price
4. Close price
5. Upper wick
6. Lower wick
7. The spread (the range between open and close)

Now, while all of these play a role in defining price action, the wicks and the spread are where the most revealing clues lie. When validated with volume, they provide deep insight into market sentiment.

Candlestick as a Battle

Imagine a fierce tug-of-war between buyers and sellers. At times, buyers take control, pushing the price higher. Other times, sellers regain their footing and drive prices lower. This struggle plays out within every single candle, no matter the timeframe.

Now, think of price action as a sine wave, constantly oscillating up and down. A single candle might tell you where price ended, but how it got there? That’s where the real story lies.

In above figure, we see price action illustrated as a sine wave. In this case, buyers emerge victorious. However, price could have taken any number of paths to form the same candle. And this is key: what matters most is the candle’s final form.

The Spread: Market Sentiment in Motion

The spread—the difference between the open and close—gives us a snapshot of sentiment:

• A widespread signals strong market conviction. If the candle closes above the open, it’s a bullish signal. If it closes below, sellers had the upper hand.
• A narrow spread suggests indecision—neither buyers nor sellers could fully take control.

Seems simple, right? But wait—there’s more.

The Power of Wicks: Shadows of the Battle

Wicks tell us the hidden story behind each candle. They represent rejected price levels, moments where the market tested a certain direction before reversing.

Think of an auction: if a product gets multiple bids, the price fluctuates before settling. The same happens in the market. A candle with no wicks suggests price moved steadily in one direction—unwavering conviction from buyers or sellers. But a candle with long wicks tells a different story: a struggle, a tug-of-war, an attempt to push the price one way before it ultimately found balance.

This is the power of the wick. It reveals sentiment shifts hidden within a single candle. And yet, many traders stop at price action alone, ignoring volume entirely. But why?

Volume is the missing puzzle piece. It validates price movement, confirming whether a shift in sentiment is genuine or merely a fleeting moment of market indecision. If price action traders are reading this, feel free to convince me otherwise—I’m always open to learning.

Lower Wick Example

Let’s dive deeper. Imagine a candle forming with a long lower wick. What does that tell us?

The market opens. Immediately, sellers step in, driving prices lower. It’s a landslide—buyers are overwhelmed. The session progresses, and price continues to sink. Perhaps there are brief pauses, small attempts to reverse, but the downward momentum is undeniable.

Then, something shifts. Buyers start creeping back in. The price has dropped to an attractive level, and demand increases. Sellers begin to lose their grip. Slowly, the balance tilts, and buyers start taking control.

By the end of the session, price has recovered completely, closing exactly where it started. The battle is over, and the bulls have won the second half.

But what does this price action reveal? Two key takeaways from this move:

1. A full reversal in sentiment – what started as heavy selling turned into strong buying.
2. A bullish close – despite early losses, price recovered, signaling buyer strength.

Does this mean an uptrend is coming? Not necessarily and you will discover why once we start looking at volume, which will then give us the complete picture.

At the moment we are simply considering price action, which is only half the picture, but one thing is certain—the wick matters. And a vital part of Volume Price Analysis, as is the spread. In this case the spread was zero, which is just as significant as any large spread of the candle. It shows us that at some point, sellers were in control, only to be overpowered by buyers. Whether this is a turning point or just a temporary shift depends on the broader context and, of course, volume.

Upper Wick Example

Now, let’s flip the scenario. What if the candle has a long upper wick?

This time, buyers take the lead as soon as the session begins. The price surges higher, driven by aggressive demand. Sellers are forced to retreat. It looks like a strong bullish move—but then something changes.

The momentum slows. Buyers start struggling. The price reaches a level where sellers feel comfortable stepping in. The market hesitates. Then, selling pressure builds, and just like that, the tide turns.

One by one, buyers begin closing their positions, taking profits. Sellers flood the market, pushing the price lower. By the time the session ends, the gains have been erased, and price closes back at the opening level.

Again, two crucial takeaways from the price action:

1. A complete reversal in sentiment – what started as bullish enthusiasm ended in bearish control.
2. A bearish close – despite early gains, sellers dominated the second half.

Like before, this doesn’t necessarily mean a major downtrend is forming. The volume tells the real story.

Again, this is a stylized view of the price behaviour. Nevertheless, this is what has happened over the session of the candle, and it makes no difference as to what time frame we are considering. This could be a candle on a 5-minute chart, a daily chart or a weekly chart, and this is where the concept of time comes into play. This type of price action, accompanied with the correct volume profiles, is going to have a significantly greater effect when seen on a daily or weekly chart, then when seen on a 1 minute or 5-minute chart.

This is something we will cover in more detail in the next few articles. But what does this price action look like on a price chart in candle form?

Lower Wick Candle

While this candle might not seem particularly exciting at first glance, it holds immense significance in price action—especially when analyzed alongside volume. Together, price action and volume reveal critical clues about where the market is likely headed next.

Now, let’s look at another candle—one that’s just as powerful in its own right.

Upper Wick Candle

This particular price pattern is one we’ll revisit time and time again—it’s that important. If we were solely focused on price action trading, this might be where the discussion ends. After all, just by analyzing the candle’s wick, we can visualize the battle between buyers and sellers.

Start Looking Beyond Just Price

But here’s the problem: while price action shows us what happened, it doesn’t tell us how strong that movement was or whether it’s even reliable. Was the shift in price genuine, or was it just a temporary fake-out? And if it was real, how much momentum does it actually have?

This is where price action alone falls short—it only gives us half the picture. The missing piece? Volume.

So, the next time you analyze a candlestick, don’t just focus on where it opened and closed. Look at the wicks, the spread, and most importantly, volume. That’s where the market’s true intentions lie.

Now, let me ask you: Next time you see a long wick, will you stop at price action, or will you dig deeper into volume to confirm the story? The market speaks—but only if you’re willing to listen.

In the upcoming articles, we’ll break volume down from the ground up and see why it’s essential to understanding market moves with confidence.

Note: This article is part of Tradonomics’ Smart Money Secrets with Volume Price Analysis series. Explore it to unlock powerful trading insights and master Volume Price Action!