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CandleStick Charts |
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The Basics of Candlestick Charts The difference between the stock bar charts you may already be familiar with and candlestick charts, can be rather simple. As you may know, stock price bar charts simply display the opening, closing, high and low prices on a vertical bar that joins the high and low price. As such, opening and closing prices are shown as small horizontal ticks at the left and right side of the bar. On these charts, no distinction is made between up and down price moves. The high and low are the most important points.
Candlestick bullish shapes have open real bodies that appear white. The thinner line at the top is the upper shadow and the one under the real body is called the lower shadow.
Candlestick bearish shapes have solid (red or black) real bodies. The thinner line at the top is the upper shadow and the one below is the lower shadow. Long black candlesticks show strong selling pressure. The longer the black candlestick is, the further the close is below the open. This indicates that prices declined significantly from the open 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. These terms are important to understand before you delve into shapes, which are comprised of these components in differing ways. |
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