candlestick
A bar that shows the open, high, low and close of one period, coloured by whether the price rose or fell.
A candlestick is a chart mark that shows the opening, highest, lowest, and closing prices during one time period. Its body connects the open and close, while thin lines show the high and low.
The candle's color commonly indicates whether the close was above or below the open. A daily candle summarizes one day; a shorter timeframe summarizes less time. A candle records prices that occurred, but it does not explain why they occurred or predict the next move.
Example
A daily candle for Northwind Foods opens at $20, reaches a high of $23, falls to a low of $19, and closes at $22. Its range is $23 − $19 = $4. Since $22 is above $20, the body runs from $20 to $22 and would usually be shown as an up candle. The upper wick is $23 − $22 = $1; the lower wick is $20 − $19 = $1. These four values describe the day, not what the next day must do.
Common mistakes
- Reading the body as the whole price range. The wicks contain the high and low.
- Comparing candles from different timeframes as if they cover the same period. A five-minute candle and a daily candle summarize very different spans.
- Treating a candle shape as a certain forecast. It is a compact record of past trading, not proof of what comes next.
- Forgetting costs and risk when turning a chart observation into a trade. Most people who trade lose money.
Learn it in the course
- Candles and timeframes · Read one candle in a few seconds, and see how a calm week can hide one frightening day.