When you start your trading journey, it seems like a puzzling and daunting task in the beginning. For example, reading charts has always been a difficult and confusing task for almost everyone. After all, loads of charts are there, such as a line chart, bar chart, and, of course, candlesticks. A candlesticks chart is one kind that is used to have a quick view of price movements in the market. The stock candlestick tells you the degree of movement, which is positive or negative.
So, how To Read Candlesticks? Here We Go with Candle Reading!
The Basics of How Can You Read Candlesticks –
There are various kinds of candles, Doji candles, hammer candles, and many others. If the open price is at the lower end while the closing price is a little bit higher, it is typically called a Doji candle. Let’s now begin with the basics of reading candlesticks.
A price candle is divided into two main parts, body and wick.
The Body
The candlestick body has two points; open and close, as can be seen in the image below:
Usually, two colors are used to construct candlesticks, red and green. The colors of the candle depict the price direction.
Bearish Candle
If the candle is red, it is typically a bearish candle, as can be seen in the image below:
If the opening price is 80 while the closing price is 70, it means the opening price is greater than the closing price.
Bullish Candlestick
If the opening price is at the bottom whereas the closing price is at the top, it is typically called a bullish candlestick. It is usually shown in green color.
In this case, the closing price of 80 is greater than the opening price of 70.
One thing you must know is that every candle shows the price movement for a specific period in the chart. This means that in a daily chart, every candle shows the open price, close price, and wick for that day. In simple words, each fully formed candle represents the price action for a specific period.
Wick
It tells you about some crucial data. The top part of the wick tells you about the share’s highest price on that particular day. The lowest point shows the lowest price of the share on the same day.
However, to find the price range, you must calculate its range by subtracting the price at the bottom of the wick from the price at the top. With this knowledge about candle reading, you can understand trend lines and different price patterns as a trader.
Candlesticks Reading with the Help of an Example
Suppose the open price is 100, the close price is 120, the high point is 122, and the low point is 90.
In this case, the candle will be green in color because the open price is at the lower end, 100, while the close is at the high end, 120.
Hope you have understood it well now, and reading candlesticks will be as simple as this article!
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