In this sea of technical analysis, the most important part is a candle. It is impossible to have candlestick chart without candle. This articles is here to clear all your basic doubts about the candle. It will help you in your journey of share market and finance. The candlestick chart is also useful for trading cryptos. So lets get a step ahead on your journey of stock market.
Understanding the concepts of a candle
In the picture above you can see the candles. In the article we are going to continue with the green and red colours but the colour of candle can be different as many people use white and black also. We will go with green and red. The picture is just to give you the idea of what is the body and wick of candle. The terms are needed again in the article and are useful in future also.
Wick- The line above and below the box is called wick. We will see the detail about the wick in the article later. It is just to let you understand the concept.
Body- The solid boxes filled with the green and red colour are called bodies of candles. The body is area between opening price and closing price. The boxes and wicks mean something, but what? We shall see it later. Just understand the concepts.
What does the body and wick mean in a candle of candlestick chart?
As mentioned earlier, the body is area between the opening price and closing price. Larger the difference between opening price and closing price bigger the candle will be and vice a versa. The highest point of the wick above the body shows the highest price of the timeframe. The lowest point of the wick below body shows the lowest price of the selected timeframe. This was the simple idea behind the wick and the body. Let’s clear it further.
Understanding the green candle
Here is a green candle in the picture. You know the body and the wick. In the green candle, the opening price is always below closing price. It shows the price has increased in the timeframe. When there is increase in the price than the opening price, it means there is a green a candle.
In simple words when the price goes above the opening price it forms a green candle. Now we are clear with the body of green candle. Let's come towards wick. The week above the body connects the highest price of the time frame and the body in a straight standing line. This wick is called as upper wick.
In the same way the wick which connects the lowest price of the time frame with the body is called lower wick.
Highest point of upper wick shows the highest price of the time frame and the lowest point of lower wick shows the lowest price of the time frame.
Understanding the red candle
Here is a red candle in the picture. In a red candle the opening price is always above the closing price it shows that it the price has decreased in the time frame when there is a decrease in the price than the opening prices it means there is a red candle.
In simple words when the price goes below the opening price it forms a red candle. now we are clear with the body of green candle let's move towards wick.
The wick is decided in a same way as decided for a green candle as we have studied it earlier. Means the lowest point of lower Wick shows the lowest price and the higher point of the upper wick shows the highest price and the body is area between in the opening price and closing price.
Different types of candles on a candlestick chart
There are many types of candles form due the movement in prices. this can tell us may things. And many people put their hard earned money after studying candlesticks. Many types of candles are there depending upon there shape.
Names of types of candles- Doji, spinning top, hammer, shooting star, shaven head, shaven bottom
We shall see only the names till now. The details about the types will be covered in the later articles. We must stick to our topic for today.
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How candlestick chart helps in trading?
The collection of many(all) the candles together becomes the candlestick chart. The candelstick chart is very popular and any new person in trading is first acknowledged to candlestick chart most of the times today. Now it is used for trading in cryptocurrencies also. It explains the price movements in any paricular time. The intraday traders, short term traders, medium term traders use the candlestick chart. The candlestic chart shows many patterns which can give confidence to traders. Many people who use the strategy of price action can feel it easy to apply it on the candlestick chart. And it is simple to understand.
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