Introduction to Candlesticks

How to Read Candlestick Charts

The only part of the forming candlestick chart that does not change is the opening price. All others, the highs and low will change and ultimately end at a closing price that will remain. The highest price and lowest price that was reached during that session will be plotted via the wicks.

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Just above and below the real body are often seen the vertical lines called shadows (sometimes referred to as wicks). For example, candlesticks can be any combination of opposing colors that the trader chooses on some platforms, such as blue and red. There are many breakout patterns that can provide useful entry and exit points. Ascending and descending triangles, bearish and bullish flags, and pennants are all common patterns traders use to generate buy and sell signals.

Understand the Essential Patterns of Candlestick Charts

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However, the strong finish indicates that buyers regained their footing to end the session on a strong note. While this may seem like enough to act on, hammers require further bullish confirmation. Further buying pressure, and preferably How to Read Candlestick Charts on expanding volume, is needed before acting. Such confirmation could come from a gap up or long white candlestick. Hammers are similar to selling climaxes, and heavy volume can serve to reinforce the validity of the reversal.

Types of trading charts and how to analyze them

If the open or close was the lowest price, then there will be no lower shadow. Commodity and historical index data provided by Pinnacle Data Corporation. The information provided by, Inc. is not investment advice. This image will give you a better idea of the hammer candle family. The green arrows represent moves higher while the red arrows represent price declines.

How to Read Candlestick Charts

This is reflected in the chart by a long white real body engulfing a small black real body. With bulls having established some control, the price could head higher. Price charts visualize the trading activity that takes place during a single trading period (whether it’s five minutes, 30 minutes, one day, and so on). Generally speaking, each period consists of several data points, including the opening, high, low, and/or closing prices. When reading stock charts, traders typically use one or more of the three types—line, bar, and candlestick. Here’s how to read a candlestick chart for day trading; remember while day trading that a single candle typically cannot provide you with enough information to take action.