THE ULTIMATE CANDLESTICK PATTERNS THAT WILL MAKE YOU EARN

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WHAT IS A CANDLESTICK CHART?
A candlestick chart is simply a chart composed of individual candles, which traders use to understand price action.

Candlestick price action involves pinpointing where the price opened for a period, where the price closed for a period, as well as the price highs and lows for a specific period.

The period that each candle depicts depends on the time-frame chosen by the trader. A popular time-frame is the daily time-frame, so the candle will depict the open, close, and high and low for the day.

The different components of a candle can help you forecast where the price might go, for instance if a candle closes far below its open it may indicate further price declines.

READING CANDLESTICK CHARTS – TALKING POINTS:
> Candlestick charts differ greatly from the traditional bar chart
> Traders generally prefer using candlestick charts for day-trading because they
   offer an enjoyable visual perception of price
> It’s important to understand the key components of a candle, and what they indicate,
   to apply candlestick chart analysis to a trading strategy

The image above represents the design of a typical candlestick. There are three specific points (open, close, wicks) used in the creation of a price candle. The first points to consider are the candles’ open and close prices. These points identify where the price of an asset begins and concludes for a selected period and will construct the body of a candle.

Each candle depicts the price movement for a certain period that you choose when you look at the chart. If you are looking at a daily chart each individual candle will display the open, close, upper and lower wick of that day.

On the chart, each candlestick indicates the open, high, low, and close price for the time frame the trader has chosen.

For example, if the trader set the time frame to five minutes, a new candlestick will be created every five minutes. For an intraday chart like this one, the open and close prices are those for the beginning and end of the five-minute period, not the trading session.

Candlesticks also show the current price as they're forming, whether the price moved up or down over the time frame, and the price range the asset covered in that time.

Open price:
The open price depicts the first price traded during the formation of the new candle. If the price starts to trend upwards the candle will turn green/blue (colors vary depending on chart settings). If the price declines the candle will turn red.

High Price:
The top of the upper wick/shadow indicates the highest price traded during the period. If there is no upper wick/shadow it means that the open price or the close price was the highest price traded.

Low Price:
The lowest price traded is the either the price at the bottom of the lower wick/shadow and if there is no lower wick/shadow then the lowest price traded is the same as the close price or open price in a bullish candle.

Close Price:
The close price is the last price traded during the period of the candle formation. If the close price is below the open price the candle will turn red as a default in most charting packages. If the close price is above the open price the candle will be green/blue (also depends on the chart settings).

The Wick:
The next important element of a candlestick is the wick, which is also referred to as a ‘shadow’. These points are vital as they show the extremes in price for a specific charting period. The wicks are quickly identifiable as they are visually thinner than the body of the candlestick. This is where the strength of candlesticks becomes apparent. Candlesticks can help traders keep our eye on market momentum and away from the static of price extremes.

When reading candlestick charts, be mindful of:
> The time frames of trading.
> Classic price patterns.
> Price action.