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Candlesticks

Candlesticks are graphical representations of price movements in a specific time period for trading financial assets such as stocks, forex, commodities among others. The concept of candlestick charting originated from Japan over 100 years ago and is widely used in technical analysis to predict price movements.

A single candlestick consists of four main parts: the open, close, high, and low. The ‘body’ of the candlestick is formed by the opening and closing prices. If the closing price is higher than the opening price, it forms a ‘bullish’ candlestick, often shown in green or white. Conversely, if the opening price is higher than the closing price, it results in a ‘bearish’ candlestick, typically portrayed in red or black.

The ‘wick’ or ‘shadow’ of the candlestick represents the highest and lowest prices during the time period of the candlestick. The upper wick indicates the highest price point, whereas the lower wick marks the lowest price point.

Candlestick patterns can provide key insights about market psychology and potential reversals in market trends. Hence, understanding candlesticks is essential for carrying out effective technical analysis in trading.

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