Understanding Candlestick Charts

 

In order to establish a candlestick chart, you must have a data set that incorporates open, high, low and close values for on every occasion period you would like to display. The hollow or filled percentage of the candlestick is called “the body” ( likewise known as “real body”). The long thin lines above and below the body represent the high/low range and are called dark areas”; ( also referred to as “wicks” and “tails”). The high is marked by the the surface of the upper shadow and the reduced by the bottom of the low shadow. If the stock closes more than its opening price, a hollow candlestick is drawn with the bottom of the body representing the opening price and the the surface of the body representing the closing price. If the stock closes lower than its opening price, a filled candlestick is drawn with the top of the body representing the opening price and the bottom of the body representing the closing price.

When equated with traditional conventional bar charts, many traders consider candlestick charts more visually appealing and easier to interpret. Each candlestick provides an easy-to-decipher picture of price action. Immediately a trader can see compare the bond between the open and close in addition to the high and low. The bond between the open and close is viewed vital details and forms the essence of candlesticks. Hollow candlesticks, where the close is greater than the open, indicate buying pressure. Filled candlesticks, where the close is less than outside, indicate selling pressure.

Long Body Vs Short Body

By and large, the longer the body is, the more intense the buying or selling pressure. Conversely, short candlesticks indicate little price movement and represent consolidation. Long white candlesticks show strong buying pressure. The longer the white candlestick is, the further the close is above outside. This suggests that prices advanced significantly from open to close and buyers were aggressive. While long white candlesticks are in general bullish, much hinges on their position within the broader technical picture. After extended declines, long white candlesticks can mark a potential turning point or support level. If buying gets too aggressive after a long advance, it can result in abnormal bullishness.

Long black candlesticks show strong selling pressure. The longer the black candlestick is, the further the close is below outdoors. This suggests that prices declined significantly from outside and sellers were aggressive. After a long advance, a long black candlestick can foreshadow a turning point or mark a future resistance level. After a long decline a long black candlestick can indicate panic or capitulation.

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