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How to read candlestick charts?
Candlestick charts were invented in Japan more than a century before the West developed bar charts and point-and-figure charts. In the 1700s, a Japanese man named Homma discovered that, because there was a link between price and rice supply and demand, the markets were also heavily influenced by traders' emotions.
A daily candlestick chart displays the open, high, low, and close prices for the day. The "real body" of a candlestick is the wide or rectangle part that shows the relationship between opening and closing prices.
This real body depicts the price range between the day's open and close.
When the real body is filled with black or red, it indicates that the close is lower than the open and is referred to as a bearish candle. It demonstrates that the prices opened, the bears pushed them down, and the prices closed lower than the opening price.
If the real body is empty, white, or green, the close was higher than the open, indicating a bullish candle. It demonstrates that the prices opened, the bulls pushed the prices higher, and the prices closed higher than the opening price.
The thin vertical lines above and below the real body are known as the wicks or shadows, and they represent the trading session's high and low prices.
A daily candlestick chart displays the open, high, low, and close prices for the day. The "real body" of a candlestick is the wide or rectangle part that shows the relationship between opening and closing prices.
This real body depicts the price range between the day's open and close.
When the real body is filled with black or red, it indicates that the close is lower than the open and is referred to as a bearish candle. It demonstrates that the prices opened, the bears pushed them down, and the prices closed lower than the opening price.
If the real body is empty, white, or green, the close was higher than the open, indicating a bullish candle. It demonstrates that the prices opened, the bulls pushed the prices higher, and the prices closed higher than the opening price.
The thin vertical lines above and below the real body are known as the wicks or shadows, and they represent the trading session's high and low prices.
Reading candlestick charts involves understanding the visual representation of price movements in financial markets. Each candlestick typically represents a specific time frame, such as a day or an hour. The body of the candlestick shows the opening and closing prices, with colors indicating whether the price rose or fell during that period. A green (or white) candle indicates a price increase, while a red (or black) candle signifies a decrease. The thin lines extending from the body, called wicks or shadows, show the highest and lowest prices reached during the timeframe. Patterns formed by candlesticks, such as doji, engulfing, or hammer, offer insights into market sentiment and potential future price movements. By analyzing these patterns and understanding the context, traders can make informed decisions about buying or selling assets.
Oct 03, 2022 10:51