Candlestick Charts For Beginners

If you are looking at a daily candlestick chart, the shadow will display the intraday high and low. The top shadow shows the day’s high, while the bottom shadow shows the day’s low. The length of the shadow also tells a story like whether the price moved up or down during the trading day. Just how to read candle stick chart like other time-based charts, the timeframe you analyze the candlestick chart is very important. The timeframe would determine the significance of the candlestick patterns. A reversal pattern you see on a 1-minute chart will not be as significant as the one you see on a daily timeframe.

  • Market Structure is the cornerstone of reading candlestick charts.
  • They are used to describe price movements of a particular liquid security, currency, or derivative instrument like futures or options.
  • This in-depth guide will help you get familiar with bullish and bearish candlestick patterns and learn how to use them in your daily trading activities.

The candlestick chart provides a lot of useful information about what price has done within the specified timeframe. And with its color coding and visible shapes and patterns, you can easily see what’s happening in the market at a glance. To read candlestick charts how to read candle stick chart effectively, you should start by studying the past by looking for repeatable patterns that occurred at turning points. You will also learn about some of the common candlestick chart patterns that traders look for to indicate potential turning points in the market.

Double Candle Pattern

It is perhaps the most sought after bullish candlestick patterns as it is more confirming of a bullish move in the price of a stock. This pattern shows pure and unquestionable control by the buyers, and almost always results in higher trending prices. On a candlestick chart, the time is plotted on the x-axis and the prices on the y-axis. So, the candlesticks get plotted along the time scale as per the range of trading prices. You can understand the trend of a particular stock and also find an appropriate entry/exit point by reading candlestick charts.

Accordingly, we harness the best charting techniques of the East and West to provide you with uniquely effective trading tools. Learning how to read candlestick chart for day trading was truly one of the best things I could have done to improve my success in initiating trades.

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Even if you are not a trader and just an investor, you should still have knowledge about candlestick charts. Because no news or other internet sources will give you more useful information about a stock than its price chart. The above chart shows how to read candle stick chart the same exchange-traded fund over the same time period. The lower chart uses colored bars, while the upper uses colored candlesticks. Some traders prefer to see the thickness of the real bodies, while others prefer the clean look of bar charts.

Today, I am proud of myself for investing time into learning how to read candlestick chart for day trading. The Inverted Hammer looks exactly like a Shooting Star, but forms after a decline or downtrend. Inverted Hammers represent a potential trend reversal or support levels. After a decline, the long upper shadow indicates buying pressure during the session. However, the bulls were not able to sustain this buying pressure and prices closed well off of their highs to create the long upper shadow. Because of this failure, bullish confirmation is required before action.

Green Candlesticks

These points identify where the price of an asset begins and concludes for a selected period and will construct the body of a candle. Each candle depicts the price movement for a certain period that you choose when you look at the chart. If you are looking at a daily chart each individual candle will display the open, close, upper and lower wick of that day. There are plenty of other patterns you can trade out of candlestick formations. This can help you get in and out of your trades with confidence and prudence. Afterwards, you should be ready to trade after doing proper back testing of your setups or strategy. While candlestick patterns can help identify trading opportunities, not all candlesticks are reliable.

The reliability can vary based on factors like the timeframe and the security being traded. Due to questions about whether candlestick patterns are reliable, smart investors can use candlesticks alongside other indicators to improve their technical analysis. The body of a candlestick is usually a rectangular shape that shows the open and close price. The longer the body, the greater the change in price between the open and close.

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However, reading candlestick charts and patterns can be difficult, especially if you’re a beginner. With candlestick charts, one can use candlestick charting techniques, or Western techniques, or a combination of both. This union of Eastern and Western techniques provides our clients with uniquely effective tools to help enhance profits and decrease market risk exposure. At, we have found the candlestick charts are most potent when merged with Western technical analysis.

There are three specific points used in the creation of a price candle. The first points to consider are the candles’ open and close prices.

Patterns In Candlestick Charts

Bar charts are not as visual as candle charts and nor are the candle formations or price patterns. Also, the bars on the bar chart how to read stock charts make it difficult to visualize which direction the price moved. The image below represents the design of a typical candlestick.

how to read candle stick chart

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