Candlestick Charts

Candlestick charts provide much more information than a simple line graph. When we analyze the performance of stocks, a line chart will only show us the closing price of each given period. A candlestick chart shows the high, low, closing price, and opening price of a specific stock for a given time period.

Candlesticks also tell us if a stock closed higher or lower than its opening price simply from the color. More likely you will see candlesticks charts colored green and red, but sometimes you may see black and white ones. Green or white candles mean that a stock opens higher than what it closed at during the previous cycle. Red or sometimes black candlesticks represent a stock that opened below the price of the previous cycle’s close. It is important to note that color does not represent a stock’s performance on a given day, but rather its opening price in relation to the previous time periods close. Another feature in the candlestick charts is their fill. Hollow candle real bodies show that the stock closed higher than it opened. Filled real bodies show the opposite: show the opposite: a stock closed lower than it opened.

When analyzing stocks, candlestick charts truly give you so much more information to help you make more informed and thought out decisions. A line graph that provides just the closing price just isn't enough information to fully understand the story behind a stock's performance and movement throughout a given time period.

At first candelstick charts can be confusing and it'll be easy to mix up the differences between the colors and fills. As long as you keep looking and them and going over the meanings of each, in little time, you'll be able to master it. Take a look at the graph to the right and utilize the images above to help you decode the meaning of the graph. We can start to see trends within this small sample even, and as you learn more about stocks, you'll be able to make informed decisions based upon certain trends that occur.