Open, close and the body

A candle is a compression. It takes every trade that happened in a fixed window of time, throws away almost all of it, and keeps four numbers: the first price (open), the last price (close), the highest price (high) and the lowest price (low). That is all a candle is. Everything you will ever read into one has to be reconstructed from those four numbers, so it is worth being precise about them before adding any interpretation.

This lesson covers the two numbers that build the body: the open and the close.

The four numbers

Notice what is missing. There is no volume in a candle (that is a separate bar underneath). There is no record of the order in which the high and low happened. There is no record of how long price spent at any level. A candle with a big range might have spent 55 minutes of an hour sitting still and 5 minutes moving; the candle cannot tell you.

The body

The body is the rectangle drawn between the open and the close. Its two properties are direction and size.

• Direction: if close > open, the candle is bullish (conventionally green or white, drawn hollow on some charts). If close < open, it is bearish (red or black, filled). If close = open, there is no body, only a line.
• Size: body = |close − open|. The absolute value matters; a body is a distance, never negative.

    A          B          C          D

  +----+                            +----+
  |    |     +----+                 |####|
  |    |     |####|     ------      |####|
  |    |     +----+                 |####|
  +----+                            |####|
                                    +----+

Hollow boxes are bullish, hashed boxes are bearish in the sketches throughout this course.

Body as a fraction of price

A 1.30 body on a $42 stock and a 1.30 body on a $420 stock are not the same thing. Divide the body by the price to compare candles across instruments.

• Candle A: 1.30 ÷ 42.10 = 3.1%. That is a large daily move for most large-cap stocks and a small one for many crypto assets.
• Same body on a $420 stock: 1.30 ÷ 420 = 0.31%. A quiet day.

When you compare a candle against "normal", always compare within the same instrument and timeframe. The honest question is: is this body bigger or smaller than the last twenty bodies on this chart? The next lesson gives you a proper unit for that.

Key idea: The body is the net result of the period: where the fight ended relative to where it started. It says nothing about the path taken in between.

What the body does and does not tell you

A large bullish body means buyers finished the period well above where it started. It does not mean buyers were in control the whole time. Consider two ways to build the same candle:

1. Price opens at 42.10, grinds higher all hour, closes at 43.40. Steady buying.
2. Price opens at 42.10, drops to 41.00 in the first ten minutes, then rips to 43.40 in the last twenty. Sellers were briefly winning, then got run over.

Both produce a bullish body of 1.30. Only the wicks (next lesson) hint at the second story, and even then only partially. If the path matters to you, drop to a lower timeframe and look at the candles inside.

The close is the most important number

Of the four numbers, the close carries the most weight, for a practical reason: it is the price at which the period ended with no further chance to react. Daily closes are where funds mark their books, where margin is calculated, and where anyone who wanted to be flat for the night had to be flat. An intraday high that was touched for three seconds is a fact; a close is a decision.

When traders say "price closed above resistance" they mean the close, not the high. A wick through a level and a close back below it is a rejection, not a breakout. This distinction will run through the whole course.

Open relative to the previous close

On instruments that trade continuously (forex, crypto, most futures) each candle's open is usually within a tick or two of the previous close. On stocks, the open of the day's first candle can be far from yesterday's close because news arrives while the market is shut. That difference is a gap, and Lesson 3 covers it.

For now, notice one consequence: on a daily stock chart, the open already contains information (the overnight reaction). On a 5-minute crypto chart, the open contains almost none; it is just where the last candle stopped.

Try it: Pull up any daily chart and pick ten consecutive candles. For each, write open, close, body size and direction in a table. Then divide each body by that candle's open to get a percentage. Circle the largest and smallest. You have just built the beginning of a "what is normal here" reference, which is the foundation of everything else in this course.

Recap

• A candle keeps four numbers from a period: open, high, low, close. Nothing else.
• Body = |close − open|; direction is bullish if close > open, bearish if close < open.
• Compare body size only against the same instrument and timeframe, ideally as a percentage of price.
• The body shows where the period ended relative to where it started, not the path taken.
• The close is the decisive number; "closed above" and "wicked above" are different claims.