How To Read Candlestick Charts

Knowing how to read candlestick charts is necessary for both stock trading and foreign fx trading. Candlesticks are a record of price movements that will help a trader to identify trends and spot upcoming breakouts and reversals or retracements. These can be prices of anything: stocks, commodities, currencies or whatever. The open and close prices may be the prices for a day’s trading but in most cases you have control over the period and you can set your chart to show a candle for each hour, for 5 minutes or whatever. If you are designing systems around this type of chart you will possibly wish to check your signals over more than one period of time before you open a trade. In this example the open price is the base of the candle’s wide block and the close price is the head of the block. In this example naturally the higher edge of the body is the open price and the lower edge is the close. In all cases, the high during the period is the apex of the vertical line or wick stretching upward from the top of the block. The low in the period is the base of the vertical line or wick running down from the bottom of the block. Some charts these days are shown in 2 colors. You might have green or blue for a bullish period when the price was rising and red for a bearish period when the price was falling.