A candlestick chart is simply a chart made up of candlesticks to describe the movement of price in a particular timeframe. This timeframe can be 1 minute or one hour or one day etc.
Price And Time Charts
How do you represent how price changes over time? With a price time-chart.
There are 3 main price times charts used:
- a candlestick chart
- a bar chart
- a line chart
The only difference between a candlestick chart and a bar chart is the body: the candlestick chart has a body but a bar chart does not.
Now, each candlestick in the chart represents 4 important information about how price moved during that time period:
- the opening price.
- the closing price
- the high price
- the low price
If a candlestick opened and closed at a higher price at the end of a period or timeframe, that is a bullish candlestick.
If a candlestick opened and closed at a lower price then that is a bearish candlestick.
Once you have all these bullish and bearish candlesticks form one after another in a chart, you have a candlestick chart.
Below is an example of a GBPCHF daily candlestick chart:
- each of these candlestick represents 1 day=24 hours. Once 24 hours is up, the next candlestick forms.
How To Read And Analyze A Candlestick Chart
Its really simple: if you see a lot more bullish candlesticks form in sequence in a chart, the trend will generally be an uptrend.
The opposite is also true: If you see a lot more bearish candlesticks in a candlestick chart, the trend will most likely be a downtrend.
The NZDUSD daily chart below gives an example of this…