Chapter 5: Candlestick Charts, Timeframes, OHLC, and How Candles Are Formed

1. What is a Candlestick Chart?

A candlestick chart is the most popular chart used by traders.

Each candle tells the story of:

• Where price started

• Where price ended

• Highest price reached

• Lowest price reached

A single candle summarizes all price activity during a specific time period.

2. What is OHLC?

Every candle consists of four important prices:

Memory Hack

OHLC = Open High Low Close

Think:

"Open the market → Find High → Find Low → Close the market"

3. Anatomy of a Candlestick

      High
       │
       │
    ┌─────┐
    │Body │
    └─────┘
       │
       │
      Low

Parts

4. Green Candle (Bullish Candle)

A green candle forms when:

Close Price > Open Price

Close > Open

Example

The stock gained ₹10.

This indicates buying pressure.

   High
    │
 ┌─────┐
 │     │
 │     │
 └─────┘
    │
   Low

Green = Buyers stronger than sellers.

5. Red Candle (Bearish Candle)

A red candle forms when:

Open Price > Close Price

Open > Close

Example

The stock lost ₹10.

This indicates selling pressure.

   High
    │
 ┌─────┐
 │     │
 └─────┘
    │
    │
   Low

Red = Sellers stronger than buyers.

6. How a Candle Forms

Imagine a 5-minute candle.

Step 1

Market opens at ₹100

This becomes:

Open = ₹100

Step 2

Price rises to ₹105

Now:

High = ₹105

Step 3

Price falls to ₹98

Now:

Low = ₹98

Step 4

At the end of 5 minutes, price closes at ₹103

Now:

Close = ₹103

Final Candle:

Since 103 > 100,

Result = Green Candle

7. What is a Timeframe?

A timeframe determines how much time one candle represents.

Common Timeframes

8. Why the Transcript Recommends 5-Minute Charts

For beginners, the speaker recommends:

5-Minute Timeframe

Reasons:

✅ Less noise than 1-minute charts

✅ Faster signals than 15-minute charts

✅ Easier to understand

✅ Suitable for learning intraday trading

9. Relationship Between Timeframes

Example

One 15-minute candle contains:

5 Min Candle 1
+
5 Min Candle 2
+
5 Min Candle 3
=
1 Fifteen-Minute Candle

Similarly:

15 × 1-minute candles
=
1 Fifteen-Minute Candle

10. What Does a Candle Tell Us?

A candle shows:

• Who was stronger?

  • Buyers?

  • Sellers?

• How much volatility occurred?

• Whether the market accepted or rejected prices?

This is why candlesticks are the foundation of technical analysis.

Important Terms

Chapter 5 Summary

A candlestick is built from:

Open + High + Low + Close (OHLC)

Green candle:

• Buyers won.

Red candle:

• Sellers won.

The 5-minute timeframe is recommended in the transcript for beginners learning intraday trading.

Memory Hack

OHLC = Open → High → Low → Close

Every candle tells the complete story of a battle between buyers and sellers.