Stock Price Behavior Analysis Course
Session 3: The Basic Structure and Meaning of Candlestick Charts
Now, we officially enter the core tool of price behavior analysis: the Candlestick Chart. The Candlestick Chart is the foundation for observing price behavior; it transforms market prices into a visual chart, making it easier for us to interpret market sentiment.
Basic Structure of a Candlestick
A candlestick is composed of four prices:
1. Opening Price (Open): The first transaction price during this time period.
2. Closing Price (Close): The last transaction price during this time period.
3. Highest Price (High): The highest transaction price within this time period.
4. Lowest Price (Low): The lowest transaction price within this time period.
Components of a Candlestick
• Body: The rectangular area between the opening price and closing price.
• Closing price higher than opening price: Body presents a bullish candle (green or red)
• Closing price lower than opening price: Body presents a bearish candle (black or blue)
• Upper and Lower Shadows: Fine lines between the highest and lowest prices, reflecting the range of price fluctuations.
Examples:
• Long body bullish candle: Strong bullish sentiment, buying pressure surges.
• Long upper shadow bearish candle: Increased selling pressure, weak rebound.
Understanding the structure of a candlestick is the first step in interpreting price behavior.