Introduction to Candlestick Candles

Introduction to Candlestick Candles

As you should remember from our lesson on the basics of trading charts, candle charts show the opening, high, low, and close of an instrument and the shadow of the "candle", being white if the period closing is greater That the opening of the period, and black if the closing period is less than the opening. The high and low of the whole period are connected by a thin line known as wick.

The candle charts give us an idea of what volatility there was in a particular period and whether buyers or sellers won the trading period of the candle it represents. If the candle is long and white, it tells us that the period began with buyers taking control and remained so, pushing prices up during the entire period. If a candle is long and black this is an indication of a volatile period, where sellers were imposed on buyers. A smaller wick in a long candle indicates greater control of both buyers and sellers, depending on the color of the candle.

Candles that have long wicks and short bodies indicate periods in which there was a lot of action pushing the market, either up or down, but where it ended up closing just near the opening.

If there is a long wick at the top of the candle, it means that the buyers initially controlled the market against the vendors, but then the vendors pushed back the market against the shoppers to close the period just where it opened. On the contrary, if the long part of the wick is below the sail it means that the vendors initially controlled the market in front of the buyers, but the buyers were defeated by the sellers, to close the period near the opening.

Short candles represent periods of the market in which the market closed near its opening and can represent periods of low activity in markets or periods in which neither buyers nor sellers gained much ground.

This concludes our lesson on the basics of candles. In our next lesson we will see two sailing patterns called the Doji and Spinning Top and what they can tell us about the situation of supply and demand in the market, so we hope to see them in that lesson.

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