Candlestick ChartA candlestick chart is a type of bar-chart that is commonly used in trading. It is usually used to determine price movements of a certain stock or commodity over a period of time. It is also often used in technical analysis in determining equity and currency price patterns.

Candlestick Chart Features

The candlestick chart is actually a combination of a line chart and a bar chart. Each bar in the chart usually represents the range of price movement of a certain equity over a given period of time. There are certain basic features of the candlestick chart that should be known before one may be able to better understand how to read it.

Candlestick Layout

First of all, there is the basic layout of the so-called candlesticks. These appear as bars on the chart that is composed of its body that can either be black or white. Above and below this body also has the upper and lower shadows composed of a thin line located above and below the body called the wick. The wick illustrates the highest and the lowest traded prices that a certain security at a certain time interval.

The candlestick offers traders certain information about a certain security by the way it is placed and drawn on the chart. When a certain security closed higher than it opened, the body of the candlestick is made white or is unfilled. In this case, the opening price of the security is placed at the bottom while the closing price is placed on top. The candlestick becomes black when the said security closed lower than it opened. In this case, the opening price is represented by the wick on top while the closing price is placed at the bottom. Modern candlestick charts change the colors of the typical black and white bars to better highlight price movements.

Chart Use

Candlestick charts may offer more information than jus the typical bar chart. In trading, bar charts may only display the absolute values of securities as well as their open, high, low and closing prices for a given period of time. But in addition to this, candlestick charts offer a better visual comparison for how prices for certain trading periods may relate to each other. For this reason, candlestick charts make useful aids for traders when making vital trading decisions, be it in stock, forex, options or in commodities.