The Easiest Way to Use Candlestick Charts

Understanding how to read candlestick charts is essential for both stock trading and foreign currency trading. Candlesticks are a record of changes in price that will help a trader to identify trends and spot upcoming breakouts and reversals or retracements. Many traders are able to develop profit-making trading systems about totally on the supposition of candlestick charts, and many more systems rely on them as a first or primary signal. The chart is made from a series of blocks or candles, every one showing the open, close, low and high prices over a period. These can be prices of anything: stocks, commodities, currencies or whatever. If you are coming up with systems around this type of chart you will possibly need to test your signals over more than one period of time before you open a trade. If the price slipped during the period, the body of the candle will be shaded, either black or a color. In this situation of course the upper edge of the body is the open price and the lower edge is the close.

In both cases, the high in the period is the apex of the vertical line or wick stretching upward from the apex 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 nowadays are shown in two colours.