Candlesticks: - what is it?, meaning, understanding

Whenever you see your trading screen you will notice some formats are representing to you the price movement of the security. Some are lining, some are bar chart, some candle sticks and so other type of format are present. These formats are of different type and customizable according to you. You can change these formats to facilitate you. On your trading screen some basics formats are presenting below in image.

 

Image of a candle chart: -

 

In this post we will discuss about a format generated for the representation of price movement of a security named CANDLESTICKS. It is a format originated in Japan about 100 years ago. This pattern first of all used in Japan. It is a simplest way to represent the price movement and also a easiest way to understand the movement. It has two methods to represent the price movement first the ancient method in which the color of the candlesticks was black and white and second in the current method in which the color of the candle is red and green.

 

Point of discussion: -

• What are CANDLESTICKS?
• Types of CANDLESTICKS
• Formation of CANDLESTICKS
• Importance of CANDLESTICKS

 
What are CANDLESTICKS?

Candlesticks is a format that represent the price movement of a security in the trading market. It has some essential parts that clarify the price movement of a security. These are open, high, low, close, body and wick. It presents in two colors that represent the positive and negative movement of the price. The candlesticks contain whole phycology of the price movement. A trader can predict the upcoming price and get a perfect entry and exit on the basis of the candlesticks. An image of a perfect candle chart is putted down to show the candles.

 

Types of Candlesticks: -

In the candle chart there are two types of candles are shown. One is red and another is of green color. Basically, it is of two types: -

• Bullish Candlesticks (Green Candle): -
•  Bearish Candlesticks (Red Candle)

 

Formation of Candlesticks: -

The movement of the price is responsible for the candlestick's formations. The color of the candle is dependent upon the opening and closing of the price in specific time frame.

Formation of Bullish Candle: -

Bullish Candle is form when the opening of the price is smaller than the closing price point. Let the example, a stock at the time frame of 5 minute, is opening at 52 and at the ending of the candle at the last of 5 minute is at the 59. It denotes the opening price point is smaller than closing point. Hence, it generates a green or Bullish candle.

 

Formation of Bearish candle: -

When the opening price of the share is greater than the closing price point them, it forms a bearish candle. Example: - Let, at the time frame of 5 minute the price of a security is opening at 59 and the closing price is 52. It denotes the opening price is greater than the closing point. Hence it forms a red or bearish candle.

 

Importance of Candle Sticks: -

Trading is not a game, it is a calculative and analytical business. Here, a trader make money according to its learning, predictions skill, strategies and calculative mind. For this people have different ways to improve their trading skill. There is enormous way to predict the market. But in the view of technical analysis, the price action played an important role. A trader (short time duration) traded on the basis of technical analysis. The base line of the technical analysis is Candlesticks, through which a trader can easily found the correct entry and exit point for a high accurate trade.