Candlestick chart
A candlestick chart shows four prices for each period, open, high, low and close: every candle tells you at a glance how the session went.
It was born in 18th-century Japan among rice merchants and is now the chart traders use most. A line chart only connects the closing prices; a candlestick chart also shows how much the price moved during the period and who won between buyers and sellers. Each candle can represent a minute, a day, a week or a month.
How to spot it
The body is the rectangle between open and close: green if the close is above the open (the price rose), red if it is below (the price fell). The shadows, or wicks, are the thin lines above and below the body: they reach the high and the low of the period.
Worked example
A stock opens at €50, rises to €53, falls to €49 and closes at €52. The candle is green, with the body from 50 to 52, the upper shadow up to 53 and the lower one down to 49. Had it closed at €49.50, the body would have been red, from 50 to 49.50.
How to read it
A long body signals a decisive move, a small body indecision: in a doji the open and close almost coincide. A long shadow signals a rejected price: a long lower shadow means sellers pushed the price down but buyers brought it back up. Sequences of candles form patterns such as the hammer and the engulfing.
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