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May 16, 2025
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Trading Candles Demystified: How Raw Trades Become the Foundation of Market Analysis

candles
trading
aggregation
visualization
research

Candlestick charts are everywhere in trading — from professional terminals to meme crypto bots. But what exactly is a "candle," and how do we build them from the raw, chaotic stream of trades? In this article, we'll break down the process, highlight the tricky edge-cases, and share an interactive visualizer so you can see candles form in real time.

Try the visualizer here: candle-trade-visualizer.vercel.app

TL;DR

  • A trading candle is a compact summary of price and volume for a fixed time interval (like 1 minute).
  • Aggregation is the process of turning a stream of trades into these candles.
  • Edge-cases (duplicates, gaps, out-of-order trades) matter for accuracy.
  • Visualizer: Play with trades and see candles form live!

What is a Trading Candle?

A candle (or candlestick) is a summary of market activity over a specific period (e.g., 1 minute, 1 hour, 1 day). Each candle contains:

  • Open — price of the first trade in the interval
  • High — highest price
  • Low — lowest price
  • Close — price of the last trade
  • Volume — total traded amount
  • Trade count — number of trades

It looks simple, but the devil is in the details.

From Trades to Candles: The Aggregation Process

1. The Raw Trade Stream

Every millisecond, exchanges generate trades:

{
  "timestamp": 1714000000000,
  "price": 50000.0,
  "amount": 0.1,
  "side": "Buy"
}

There can be thousands of trades per second, each just a record of a buy or sell.

2. Time-Based Grouping

To build candles, we group trades by time. For example, all trades from 12:00:00 to 12:00:59 go into the same 1-minute (m1) candle.

Algorithm:

  • For each trade, determine which interval it belongs to (truncate timestamp).
  • If a candle for that interval exists, update its high/low/close/volume.
  • If not, start a new candle.

3. Edge-Cases: Why It's Not So Simple

  • Out-of-order trades: Trades may arrive out of sequence (due to network delays, etc.).
  • Duplicates: The same trade might appear more than once.
  • Boundary trades: What if a trade lands exactly on the interval boundary?
  • Gaps: What if there are intervals with no trades?

A robust aggregation must handle all these cases. In the industry, this is critical for accurate analytics and algorithmic trading.

Example: Candle Aggregation in Code

Here's a minimal Rust example (the logic is the same in any language):

for trade in trades {
    let ts = truncate_to_tf(trade.timestamp, timeframe);
    if let Some(candle) = current_candle {
        if candle.timestamp == ts {
            // update high/low/close/volume
        } else {
            // save the current candle, start a new one
        }
    } else {
        // first candle
    }
}

Note: For correct aggregation, the trade stream should be sorted by time. If not, you need to sort first or use an algorithm that's robust to out-of-order data.

Why Does This Matter?

  • Charts: All your favorite platforms (TradingView, Binance, etc.) build their charts from candles.
  • Algorithmic trading: Strategies operate on candles, not raw trades.
  • Analytics: Indicators, signals, and statistics are all based on OHLCV data.
  • AGI and automation: For machine analysis, you need strict, unambiguous data.

Try It Yourself: Interactive Candle Visualizer

We built an interactive visualizer:
👉 candle-trade-visualizer.vercel.app

  • Add trades manually or randomly.
  • Watch how they aggregate into candles.
  • Experiment with different timeframes and edge-cases.

Conclusion

Candles are the foundation of all market analysis. Behind every simple chart is a complex aggregation process, designed to be robust against errors and edge-cases. If you're building your own systems, make sure to handle all the nuances — otherwise, your charts and strategies might be misleading.

Try the visualizer, dig into the details, and make your candles honest!

Links:

If you found this article useful, share it with your colleagues and let's make market data more transparent for everyone!

Citation

@software{soloviov2025tradingcandlesdemystified,
  author = {Soloviov, Eugen},
  title = {Trading Candles Demystified: How Raw Trades Become the Foundation of Market Analysis},
  year = {2025},
  url = {https://marketmaker.cc/en/blog/post/trading-candles-demystified},
  version = {0.1.0},
  description = {How are trading candles built from raw trades? This article explains the aggregation process, edge-cases, and offers an interactive visualizer to see candles form in real time.}
}

MarketMaker.cc Team

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