Basic Components of Candlesticks
Opening Price: The first transaction price of the trading day.
Closing Price: The last transaction price of the trading day.
Highest Price: The highest transaction price during the trading day.
Lowest Price: The lowest transaction price during the trading day.


Candlesticks typically consist of three parts:
Upper Shadow: Located above the candlestick, indicating the price range between the highest price and the closing price (or opening price, depending on the candlestick's color).
Body: Represents the price range between the opening price and closing price. A bullish candle (red or white) indicates the closing price is higher than the opening price, while a bearish candle (green or black) indicates the closing price is lower than the opening price.
Lower Shadow: Located below the candlestick, indicating the price range between the lowest price and the opening price (or closing price, depending on the candlestick's color).
Interpretation Methods for Candlesticks


Interpretation of a Single Candlestick
Bullish and Bearish Candles: A bullish candle indicates a price increase during that period, while a bearish candle indicates a price decrease.
Body Size: The longer the body, the stronger the market's attack intensity. A longer bullish body indicates more strong upward momentum; a longer bearish body indicates greater downward momentum.


Shadow Length: The longer the shadow, the stronger the market resistance or support in that direction. A longer upper shadow indicates greater resistance during an uptrend; a longer lower shadow indicates stronger support.


Interpretation of Candlestick Patterns
Double Bottom and Double Top: A double bottom (W bottom) signals a market reversal from down to up; a double top (M head) signals a market reversal from up to down.


Head and Shoulders Bottom and Head and Shoulders Top: The head and shoulders bottom is a pattern that indicates a market reversal to the upside, while the head and shoulders top indicates a market reversal to the downside.
Pregnant Line: A pregnant line usually suggests that a market reversal may be imminent.


Doji: A doji indicates that the opening price and closing price are the same during that period, reflecting a balance of power between bulls and bears. Appearing at a high may indicate a market top, while appearing at a low may indicate a market bottom.


Red Three Soldiers and Three Black Crows: Red three soldiers consist of three consecutive bullish candles, indicating a strong market uptrend; three black crows consist of three consecutive bearish candles, indicating a weak market downtrend. However, it should be noted that three black crows during an uptrend may indicate the bulls accumulating energy.
Combining Position and Volume


Position: The position of the candlestick is crucial for determining its nature. For example, a long upper shadow appearing at the early stage of an uptrend may indicate a test by the main force, while a long upper shadow appearing at the late stage of an uptrend may signal a market top.


Volume: Trading volume is an important indicator for determining market trends. In candlestick charts, trading volume is usually analyzed in conjunction with the size or color of the candlestick body. For example, a bullish candle with increased volume usually indicates strong upward momentum; while a bearish candle with increased volume may indicate strong downward momentum.

A Diagram to Help You Understand Candlesticks

1. Bullish Candle: Closing price is higher than opening price; Bearish Candle: Closing price is lower than opening price.

2. Bullish Candle: Closing price is higher than opening price; Bearish Candle: Closing price is lower than opening price.

3. Bullish Candle: Closing price is higher than opening price; Bearish Candle: Closing price is lower than opening price.

4. Doji: Closing price = Opening price, special price at limit up/down.

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