This is why candlestick charts are mostly used for technical analysis these days.įigure: If you follow the path of the candlestick prices, you can reconstruct the line charts. We, thus, get all the information that is essential for an effective price analysis at a glance. The candle shadows also show the severity of price fluctuations in each case. If we line up several candlesticks, we can reproduce the progression of line charts by following the candlestick bodies as shown below. The shadows show the entire fluctuation width. The body of the white, rising candlestick below shows that the price opened at $10 and closed at $20 in the selected time interval, but has fluctuated between $25 and $5 in the meantime, as indicated by the shadows.įigure: The trend of candlesticks from the opening price to the closing price is described by the candlestick body.
The candlestick body describes the difference between the opening and closing prices for the corresponding time period. If we set our charts so that one candlestick corresponds to one day, then we can read the daily fluctuations in the financial market using the shadows of a candlestick. The length of the shadows shows how much the price has moved up and down with respect to a candlestick within a specific duration. A white candlestick represents rising prices, whereas a black candlestick shows that the price fell during the period.įigure: A rising candlestick is shown on the left and a falling candlestick is shown on the right along with the explanations of terms used for individual candlestick components. The candlesticks are color-coded to illustrate the direction of the price action movements. A candlestick consists of a solid part, the body, and two thinner lines which are called candle wicks or candlestick shadows. These candlesticks are made up of different components to describe the price movements of financial instruments. In this article, you will learn everything you need to master candlesticks patterns like a true professional.Īs the name suggests, a candlestick chart is made up of so-called (price) candlesticks.
Today, candlestick charts are the preferred tool of analysis for traders and most investors since they provide all the required information at a glance. Candlestick charts have their origin in 17 thcentury Japan. Candlestick charts are further developed line charts – which the image below shows – that serve to compensate for the disadvantage of less information.