📊 Candlestick Charts: The Language of Charts in Trading
🔍Candlestick charts are not just shapes on the chart; they are a powerful tool used by traders to understand price movements and make decisions with confidence.
They are also a way to display price movements on the chart over a specific time period, such as a minute, hour, or day.
Each candle represents:
- Opening Price Open
- Highest Price High
- Lowest Price Low
- Closing Price Close
📌 Components of the Candle
Each candle consists of:
* The body represents the difference between the opening and closing prices.
* The upper and lower shadows represent the highest and lowest prices reached.
Color:
🔴 If the candle is green: the price closed higher than the opening, indicating a bullish trend.
🟢 If it is red: the price closed lower than the opening, indicating a bearish trend.
📖 Why do we use Candlestick Charts?
- They provide an easy visual reading of price movements.
- They reveal market psychology: Are buyers stronger or sellers?
- They help identify entry and exit points in trades.
- They are used with patterns like "Hammer," "Engulfing," and "Doji" to understand the upcoming direction.
🔍 Examples of Popular Patterns
* Hammer Candle: Appears after a decline, indicating a potential upcoming rise.
* Bullish Engulfing Candle: A green candle that fully covers the preceding red candle, indicating a reversal towards an uptrend.
* Doji Candle: Shows that the opening and closing prices are very close, indicating indecision in the market.
