Candlestick Anatomy and How to Read Stock Price Movement
•By Mahersaham Team
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Candlestick is one of the most important elements in stock technical analysis. It provides a clear visual representation of price movement within a specific time period. The image above shows two basic types of candlestick – one in green (bullish) and another in red (bearish).
Each candlestick consists of four key pieces of information:
Open – The price at which the stock opens at the beginning of the session.
Close – The price at which the stock closes at the end of the session.
High – The highest price reached throughout the session.
Low – The lowest price reached throughout the session. The body of the candlestick shows the difference between the opening and closing prices, whilst the wick/shadow above and below shows the highest and lowest price range.
Open is at the bottom, Close is at the top.
This means the stock price rose throughout the session.
It indicates strong buying pressure – buyers are dominating the market.
Open is at the top, Close is at the bottom.
This means the stock price fell throughout the session.
It indicates selling pressure – sellers are dominating the market.
Long candlesticks (whether green or red) indicate strong momentum – either aggressive buying (bullish) or aggressive selling (bearish).
Short candlesticks indicate uncertainty or lack of momentum.
Long wicks at the top or bottom indicate price rejection at that level – a potential change in direction.
By understanding candlestick anatomy, investors can read price movements better and make more accurate decisions. It is like the visual language of the market – and with practice, it can become an extremely useful tool in your trading strategy.
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A candlestick consists of four main components: the opening price (open), closing price (close), highest price (high), and lowest price (low). The candlestick body shows the range between the opening and closing prices, whilst the upper and lower wicks show the highest and lowest prices during that period.
A bullish candlestick is typically green or white, indicating the closing price is higher than the opening price. A bearish candlestick is red or black, indicating the closing price is lower than the opening price. These colours help traders quickly identify the direction of price movement.
You need to observe candlestick patterns such as doji, hammer, engulfing, and morning star. These patterns signal whether a trend will continue or reverse. Combine candlestick reading with other technical indicators such as volume and moving average for stronger signals.
Yes, candlestick analysis is highly suitable for beginners as it provides an easy-to-understand visual representation of price movement. Start by learning basic patterns before moving on to more complex ones. With consistent practice, you will become more proficient at reading candlestick charts.
Mastering candlestick anatomy is the first step to becoming a more skilled trader. With this knowledge, you can begin analysing stock charts and making more accurate investment decisions.
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