Here’s a clear explanation of Candlestick Charts:
What Are Candlestick Charts?
Candlestick charts are a popular way to represent price movements of stocks, currencies, or other financial instruments over a specific time period. They originated in Japan hundreds of years ago and are widely used by traders and investors today because they provide a lot of information in a simple visual form.
Each candlestick shows four key prices during the chosen time frame (like 1 minute, 1 hour, or 1 day):
-
Open Price: The price at which the asset started trading during that period.
-
Close Price: The price at which trading ended during that period.
-
High Price: The highest price reached during that period.
-
Low Price: The lowest price reached during that period.
A candlestick consists of two parts:
-
The body (the thick part) shows the difference between the open and close prices.
-
The wicks or shadows (thin lines above and below the body) show the high and low prices.
If the close price is higher than the open price, the candlestick is usually colored green or white, indicating a price increase. If the close price is lower than the open price, the candlestick is colored red or black, indicating a price decrease.
Why Use Candlestick Charts?
Candlestick charts help traders quickly understand market sentiment and spot patterns that may indicate future price movements, making them essential tools for technical analysis.
If you want, I can explain common candlestick patterns next!