Forex candlestick charts: how to read and draw them

Foreign exchange, forex for short, is the market for trading one currency against another. There is no such thing as the price of the euro on its own, so everything is quoted as a pair: EUR/USD is how many dollars one euro buys.

That has a consequence worth holding on to when reading a forex candlestick chart. A rising chart is not a currency getting stronger, it is the first currency getting stronger relative to the second, and the same move would appear inverted on the opposite pair. A stock chart has one company in it; a forex chart always has two economies.

A stock exchange opens and closes, so a daily candle has an unambiguous start and end and the gap between yesterday's close and today's open is real. Forex runs continuously from Sunday evening to Friday evening, and the day boundary is a convention a broker chose rather than a fact about the market.

So forex charts rarely show gaps within the week, and two brokers can draw visibly different daily candles for the same week simply by cutting the day at different hours. Intraday, activity still moves in waves as Tokyo, London and New York come in and out, which is why the same one-hour candle means something different at different times of day.

This is the part most worth understanding, because the chart does not announce it. On a stock exchange, volume is a real count: every trade clears through the exchange and the figure is the total. Forex has no central exchange. It is a network of banks and brokers, and no one of them can see the whole market.

What a forex platform shows as volume is therefore its own slice, usually tick volume, meaning the number of price updates that broker received rather than an amount of currency traded. It correlates well with real activity and it is genuinely useful, but it is not the quantity the word implies, and two brokers will give you two numbers.

CandleDraw takes the same position on this deliberately. Where a chart carries no imported volume, the volume-derived tools estimate it from candle shape, ask before drawing, and say on the chart that the figure is simulated. Nothing is presented as traded data.

A hand-drawn or generated chart is convincing or not depending on details most people never measure. We measured them, from EUR/USD exports covering a month at each timeframe, and two findings do most of the work.

The first is how often a candle has no wick on one side, meaning the open or the close sits exactly on the bar's high or low. On one-minute bars this happens about 61% of the time. By the hour it is about 7%. That is not a change in behaviour, it is arithmetic: a one-minute bar contains few enough price ticks that its extreme often is one of its ends, and an hour bar essentially never is. It is also the single strongest tell of a fabricated chart, because a drawn chart with a neat wick on every candle is a chart of a timeframe that does not exist.

The second is that the body takes a little less of the range as the timeframe rises, from about 0.53 of it at one minute to about 0.45 at an hour. Gently, and it flattens at the top. Meanwhile the doji rate holds at roughly 0.15 everywhere, and an upper wick is as likely to take any share of the wick budget as any other, at every timeframe.

Four hours, daily and weekly are extrapolated from that curve rather than measured, which is a limit of the data rather than a claim about the market.

Nothing about the drawing is specific to forex. A candle is four numbers whatever produced them, so a EUR/USD chart, a stock, an index and a crypto pair are all drawn the same way, and a CSV exported from any of them imports the same way.

What is worth carrying over is the shape. If you are drawing an intraday sequence, let some candles sit flat against their own high or low instead of giving each one a tidy wick. If you are importing real prices, remember that the volume column came from one broker. And if you are teaching from the chart, the pair convention above is usually the first thing a student gets backwards.