How to Read a Candlestick | Beginners Guide 🕯
Updated: Sep 15
If you follow me for quite a while you probably noticed that I apply a candlestick chart for the market analysis.
In this post, we will discuss how to read an individual candlestick and we will outline its important elements.
🔰The candlestick reflects the price movement for a selected period of time.
An hourly candle will show you a price action within an hour and a daily candle within a day.
Above, you can see 2 charts. On the left - daily time frame. On the right - 4h time frame. One single daily candle composes the entire price action within 24 hours, while a 4H candle - the price action within 4 hours.
🔰The candlestick pattern has a very specific shape:
it is composed of a body and a wick.
The wick of the candle indicates the range of the price action within the candle. Its upper wick will show you the highest price during that time period and its lower wick will show the lowest price, while the body of the candle indicates its opening and closing price.
🔰From the color of the body of the candle, we identify its direction.
Green signifies a bullish candle while red signifies a bearish one.
A green candle signifies that the price grows, while a red candles signifies a downward movement.
🔰The lower boundary of a body of a bullish candle will show its opening price and its upper boundary its closing price.
🔰The upper boundary of a body of a bearish candle indicates its opening price and its lower boundary its closing price level.
With so many elements within a single candlestick, one can derive a lot of valuable information.
Some candlesticks have a very specific form and are called candlestick patterns. They are applied for predicted the future market behavior.
A proper reading of a candlestick chart may unveil a lot of insights about the market, so it is very important for you to learn to work with that.