Water Candle

Water Candles are recolored versions of candles that are found in Dungeons. When this candle is held in a player's hand (not just in their inventory or placed on a surface), monster spawn rate and the amount of monsters allowed to spawn in the world total are both increased by significant amounts, making it effective for players who want to farm for mob drops or who wish to summon King Slime, as holding it makes him more likely to spawn.

The Water Candle must be in your hand for its effects on spawn rate to work. Being placed on a table, platform, or in a chest will not affect spawn rates. Also, holding multiple candles in your hand at once (in a stack) does  not  further increase spawn rates.

The Water Candle was bugged on version 1.0.3, and its effects on monster spawning were actually attributed to the Band of Regeneration. This bug was fixed in version 1.0.4.