Candlesticks show that emotion by visually representing the size of price moves with different colors. Traders use the candlesticks to make trading decisions based on regularly occurring patterns that help forecast the short-term direction of the price.
Traders use candlestick charts to analyze previous patterns to anticipate future price movements.
When trading, candlesticks are useful because they show four price points—open, close, high, and low—over the specified time period.
Candlestick charts provide the same price information for many algorithms.
Emotions often dictate trading, and candlestick charts can show this.
Candlestick Components
Just like a bar chart, a daily candlestick shows the market’s open, high, low, and close price for the day. The candlestick has a wide part, which is called the “real body.”
The scope of costs between the opening and shutting of that day’s exchanging is addressed by this genuine body. When the actual body was blacked out or filled in, the close was lower than the open. If the actual body is empty, the close was higher than the open.
These colors can be changed by traders in their trading platform. For instance, a down candle’s shade is typically red rather than black, and an up candle’s shade is typically green rather than white.
Candlestick vs. Bar Charts
Candlestick charts versus bar charts The “shadows” or “wicks” are located just above and below the actual body. The highs and lows of that day’s trading are depicted in the shadows. When the upper shadow of a down candle is short, it means that the day’s open was close to the high.
On a sunny day, a brief upper shadow indicates that the close was close to the high. The daily candlestick’s appearance is determined by the relationship between the day’s open, high, low, and close. Black or white, real bodies can be long or short. Long or short shadows are possible.
Candlestick charts and bar charts both display the same data, but in a different way. Due to the color-coding of the price bars and thicker real bodies, which are better at highlighting the difference between the open and close, candlestick charts are more visually appealing.
