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If you’re new to the market, you might not understand all the buzz about candlesticks. So let’s take a look at why they’re one of the most popular charts with experienced traders.
Prices appear in bars resembling candlesticks with wicks. The body shows the range between the opening and closing prices, while wicks extend to the high and low of the period.
Candlestick charts on Apple (AAPL). Common candlesticks on left, candlesticks with trend on right.
Candlestick charts also make it easy to see direction. Green bars generally indicate rising prices while red bars mean they’re falling.
This can help you know when to enter or exit a position. You can place an order from your chart when you see the right trade, or set an alert to signal when a level’s been crossed. As with other types of charts, you can change the candlestick colors to match your trading style. Learn how to create and customize your own candlestick chart in this brief how-to video.
In a common candlestick chart, a solid green body means the closing price is above the open. A solid red body indicates the opposite. Wicks resemble tails extending up and down.
Another chart style is called candlestick with trend. These have hollow bodies when the close is above the open and solid bodies when the close is below the open. They also use color to show if the candle’s above or below its preceding candle.
Many traders rely on automated technical analysis to highlight specific types of candles that present unique opportunities. For example, you can add a ShowMe study to highlight cross-shape candles in a Doji pattern, indicating that the bar’s close is equal or almost equal to the open.
Whether you’re new to trading, or a seasoned trader creating your own indicators and strategies, candlestick charts can help you shed light on market data so you can make decisions more effectively.
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