Candlestick Charts

Written by Trader Maker

In trading terms the candle stick chart is probably the most widely used. As with the line and bar charts the overall trend is indicated clearly. However this information held within one candle and series of candles is a lot more informative.

As with the bars there is an open and close, high and low price indicated. In most charts selling candles are red and buying candles are green.

Traders like the candle stick charts as they clearly show what happened in that particular time frame. The thin line is the wick (think candle) and this shows the HIGH and LOW price traded. The candle itself shows the OPEN and CLOSE price, but more importantly the intensity of the buying and selling.

In this example the body is red, so this is a selling candle. As the whole body is full it show all the prices were traded between the open and close. Being full it shows intense and sustained selling, this reinforces that the overall trend was a downward (selling/bearish) trend.

Candlestick Patterns

As in the explanation above I said that traders like candles because individually they contain information, and they also contain information in patterns. A series of 2 or more candles can make patterns that indicate what will happen next in the chart. Candle stick charts originated in Japan so they can have Japanese names, don't be put off they only describe shapes and patterns.

This is a simple example of 'The Hammer'. This is a reversal indicator.