What is a daily candle?

A daily candle represents one full trading day. It has four prices: open, high, low, and close. A green or white (bullish) candle closes above its open, meaning buyers controlled the session. A red or black (bearish) candle closes below its open, meaning sellers were in control.

Reading sentiment from candle shape

A long body means one side is confident and in control.

A long upper wick shows price was pushed up, then sold down.

A long lower wick shows price was sold down, then bought back up.

A small body with long wicks shows hesitation and possible reversal.

Hammer

The hammer appears after a decline. It has a small body near the top and a lower wick two or three times longer than the body. Price was sold off hard but closed near the open. This tells us buyers absorbed the selling pressure and a bullish reversal may follow.

Bullish engulfing

A bullish engulfing pattern has a small red candle followed by a large green candle that fully wraps the previous body. It shows a shift in sentiment from selling to buying. A bearish engulfing pattern is the opposite and appears at tops.

Shooting star

The shooting star appears after an uptrend. It has a long upper wick and a small body near the bottom. Price rallied high but closed near the open, showing strong selling pressure at the top.

How to trade daily candles

Identify the larger trend on the weekly or monthly chart.

Mark important support and resistance zones.

Wait for a daily candle to close with a signal at that zone.

Enter during the new session after the daily close.

Place your stop loss above the high or below the low of the signal candle.

Take profit with a risk:reward ratio of at least 1:2.

Real example

Suppose EURUSD is falling into a support zone. A hammer appears and closes as a bullish candle. You buy at the next session, put your stop loss below the hammer's low, and target twice your risk. The method is simple, but discipline matters most.

Common mistakes

Entering before the candle closes, which leads to false signals.

Looking at candles without the larger trend or key levels.

Placing stops too tight and getting stopped out before the move.

Trading too many currency pairs at once and losing focus.

Content is for reference only, not investment advice. Forex trading carries high risk.

Trading the Daily Close: Reading Candle Sentiment