Candlestick Charts explained
A Candlestick chart is a type of chart that is used to display data in order to make it easier for traders and analysts to interpret the information. Traders use these charts because they allow them to visually see how strong or weak an asset's price action has been during different periods of time.
Candlesticks consist of a body and wicks. The body is the section between the open and close prices and wicks/shadows are the parts that show you how high and low prices went during a given time frame. The tips of the shadows indicate the highest and lowest prices.
The coloring of candlesticks is used to show whether there were gains or losses during the time frame shown with white (or green) for increases and black (or red) for decreases. If the closing price is higher than the opening price, it's a bullish candle. It means that buyers have had control over sellers during this time range. On the other hand, a bearish candle is when the closing price is lower than the opening price and signals that sellers have more control in the market than buyers at that specific time period. In terms of volatility, the length of shadows indicates how much volatility there was during that particular time frame. The longer the shadows, the greater the volatility.
Candlestick charts are often used to identify patterns, which can be used to predict future price movements. There are many different types of patterns that are divided into two basic categories: bullish and bearish patterns. Bullish patterns indicate strengthening prices and positive outlooks. Conversely, bearish patterns indicate weakening prices and deteriorating outlooks.
However, it is important to remember that trading patterns do not always work, and that past performance is not indicative of future results. Always use candlesticks in conjunction with other forms of technical analysis, such as trend lines or indicators, to get a more accurate picture of the market. By doing so, you can make more informed investment decisions and potentially improve your overall trading results.