Chart Basics: Candlestick Charts

Let's take a closer look at candlestick charts, the basics of stock charts.

It may look difficult, but if you examine one thing at a time slowly and carefully, you'll get used to it in no time.

<Price changes shown on a chart>

Each candlestick represents a change in a stock's price.
A candlestick has the following meanings.
Body: shows the difference between the opening price and the closing price.

- Bullish candle: the closing price is higher than the opening price (red)
- Bearish candle: the closing price is lower than the opening price (blue)
- Wick (shadow): attached above and below the body,
it shows the highest price (high) and the lowest
price (low) during that period.

Just by looking at the shape of a candlestick, you can tell at a glance whether the stock price went up or down.

<Reading signals of rises and falls>
Here is how to identify stock price trends while looking at a candlestick chart:
1) Candle color and body size
- Consecutive bullish candles indicate an uptrend
- Consecutive bearish candles indicate a downtrend
- Large candle bodies indicate a highly volatile market

2) Candle wicks
- A long upper wick indicates strong selling pressure
- A long lower wick indicates strong buying pressure

3) Trading volume
- Rising volume when prices rise is a bullish signal
- Rising volume when prices fall is a bearish signal

By looking at candle shape, color, trading volume and so on together like this, you can get a good grasp of stock price movements.

Now, shall we practice reading candlestick charts through mock investing?