How To Read A Candlestick Chart

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Candlestick charts are one of the two most popular trading charts, because of the range of trading information that they represent, and their ease of reading and interpretation.


Candlestick charts consist of a wide vertical line, and a narrow vertical line. Each candlestick includes the open, high, low, and close, of the timeframe, and also shows the direction (upward or downward), and the range of the timeframe.


Candlestick charts are read and interpreted during trading as follows:

Difficulty: Easy
Time Required: 5 Minutes


Here's How:


Open - The open is the first price traded during the candlestick, and is indicated by either the top or bottom of the wide vertical line (the bottom for an upward candlestick, and the top for a downward candlestick). In the example chart, the upward candlesticks are colored green, and the downward candlesticks are colored red.


High - The high is the highest price traded during the candlestick, and is indicated by the top of the thin vertical bar (the wick of the candlestick).


Low - The low is the lowest price traded during the candlestick, and is indicated by the bottom of the thin vertical bar (the upside down wick of the candlestick).

Close - The close is the last price traded during the candlestick, and is indicated by either the top or bottom of the wide vertical line (the top for an upward candlestick, and the bottom for a downward candlestick). In the example chart, the upward candlesticks are colored green, and the downward candlesticks are colored red.


Direction - The direction of the candlestick is indicated by the color of the candlestick (specifically the wide vertical line). Usually, if the candlestick is green, the candlestick is an upward candlestick, and if the candlestick is red, the candlestick is a downward candlestick, but these colors can usually be customized. In the example chart, the upward candlesticks are colored green, and the downward candlesticks are colored red.


Range - The range of the candlestick is indicated by the locations of the top and bottom of the thin vertical line (the wicks). The range is calculated by subtracting the low from the high (Range = High - Low).


Source: About.com