Learn to Read The Candlesticks Like Pro
Candlesticks give you an instant snapshot of whether a market’s price movement was positive or negative, and to what degree. The timeframe represented in a candlestick can vary widely.
Green candles show prices going up, so the open is at the bottom of the body and the close is at the top. Red candles show prices declining, so the open is at the top of the body and close is at the bottom.
Each candle consists of the body and the wicks. The body of the candle tells you what the open and close prices were during the candle’s time frame.
The lines stretching from the top and bottom of the body are the wicks. These represent the highest and lowest prices the asset hit during the trading frame.
What do candlesticks tell us?
Candlesticks can reveal much more than just price movement over time. Experienced traders look for patterns in order to gauge market sentiment and to make predictions about where the market might be headed next. Here are some of the kinds of things they’re looking for:
A long wick on the bottom of a candle, for instance, might mean that traders are buying into an asset as prices fall, which may be a good indicator that the asset is on its way up.
A long wick at the top of a candle, however, could suggest that traders are looking to take profits — signaling a large potential sell-off in the near future.
If the body occupies almost all of the candle, with very short wicks (or no visible wicks) on either side, that might indicate a strongly bullish sentiment (on a green candle) or strongly bearish sentiment (on a red candle).
Understanding what candlesticks might mean in the context of a particular asset or within certain market conditions is one element of a trading strategy called technical analysis — by which investors attempt to use past price movements to identify trends and potential future opportunities.
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