Candlestick chart – how to read it?

If you are interested in the stock market and want to start trading, learn to read charts first. They are not only the basis for all trading tools and oscillators, but also constitute an independent source of information about what is happening on the market. They will be most useful to you when trading currencies, but they are not the only use for them.

What is a candlestick chart?
This way of watching the stock market first appeared in Japan, but quickly spread to Europe, where it also gained popularity. No wonder, because with the help of candles you will see not only the price movement, but also the market trends and the strength of the bulls in relation to the bearish strength. Thanks to this, you have a much better overview of the current stock market situation, which translates into more effective decisions later.

As the name suggests, the chart consists of individual candles. Each of them shows the price movement in a given period of time (depending on your settings). It is a proven system on which many traders build their investment tactics. Therefore, every broker that offers currency trading has the ability to view the stock market using a candlestick chart.

 

How is the candle structured in a candlestick chart?
When you look at any candlestick chart, you will notice that the world comes in two colors. Most often they are either black and white or red and green. Black and red symbolize a drop in price from the previous candle. On the other hand, white and green adequately – the price increases. In addition, each candle has an upper and lower fuse and a body.

The body is the most important and visible element of the candle. It is its broadest part that symbolizes the opening and closing price of a position. If the price of an asset has risen (white or green color of the candle), the opening price is the lower bound of the body, and the closing price is the upper. And if the rate has decreased (black or red), we read the limits the other way around.

So what do the wicks (thin lines on the top and bottom of the body) symbolize?

They show you what the maximum and minimum prices of the asset were at any given time. The top of the top wick is the highest rate that (e.g.) the currency has achieved, and the lowest point of the bottom wick is the minimum rate. With this information, you can clearly see how active buyers and sellers are.

As you can see, the candlestick chart is a very good source of information about what is currently happening in the market. When you get to know its capabilities and features well, you will get a powerful tool to predict upcoming price movements, which will increase your earnings.

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