I know you might be wondering, especially if you are a newbie in trading, what candlesticks actually are. They’re not the real life wax candles of course; its actually a formation used while trading in general.Lets talk about how they are formed.
To create a candlestick chart, you must have good information pf open, high, low and close values for each time period you want to display.
The filled portion is called the body and the thin lines are reffered to as shadows or wicks. The top of the upper wick indicates high and the bottom of the lower shadow indicates low. If the stock closes higher than its opening price,a hollow candlestick is formed, with the bottom indicating stock opening price and the top indicating closing price. A filled candlestick is formed, if the stock closes lower than its opening price; with the top indicating opening price and the bottom indicating closing price.
In conclusion, candlesticks are more visually appealing compared to bar or line charts. Each candlestick provides a very clear description of price actions and also the relationship the open and close, as well as the high and low. Hollow candlesticks, where the close is greater than the open, indicate buying pressure. Filled candlesticks, where the close is less than the open, indicate selling pressure.
Learn More about Candlesticks and other trading strategies here.