Understanding Candlestick Charts (Tutorial For Beginners) [Trading Basics Series]

Hello traders, I’m Luke from Disciplined Trader
This is the first video in the Trading Basics series and in this one I want to introduce
you to candlesticks. I will explain everything from what they are
to how they form. Candlesticks are the most commonly used method
of displaying the price movement of a market on a chart. Each candlestick chart will have the time
scale on the horizontal axis and the price scale of the vertical axis. Each candlestick chart you see will display
candles in a particular time interval. These intervals can be anything such as 5
minutes, 1 hour, 4 hour, 1 day, 1 week etc. So for example, here we are looking at a 5
minute chart, so this means that each candle takes 5 minutes to form and represents that
5 minutes of price action. Price action simply refers to the movement
of the price. So how do candles show us where the price
has moved? Let’s take a closer look at a candle
The first thing to note about a candle is its colour. We call a green candle a Bullish candle as
this signals that the price has moved up overall during the time period it represents. We call a red candle a Bearish candle as this
signals that the price moved down overall during the time period it represents. Candlesticks also quickly show us four important
pieces of information about the price movement they represent. They show us the opening price, the highest
price it reached, the lowest price it reached and closing price for the time period the
candle represents. They show us this information through the
two components that make each candle up: the candle body and the candle wicks. The body of a candle is the thick coloured
part of the candle and the wicks are the thin lines coming from the top and bottom of the
candle. If the body is green in colour (so a bullish
candle) then the base of the body shows the price the candle opened at, at the start of
the time period the candle represents. The top of the body shows the price the candle
closed at. The bottom of the lower wick shows the lowest
price the price reached and the top of the upper wick shows the highest price the price
reached during the candle’s time period. When looking at a red (bearish) candle, the
upper and lower wicks show us the same information but this time the top of the body shows us
the price the candle opened at and the bottom of the body shows us the price the candle
closed at. So let’s look at an example of how these candles
form: First the candle opens
Then it moves down so we have a red body Then it moves back to the price it opened
at so we are left with just a lower wick Now it moves up and so a green body is formed
Then the price falls a little again but not quite to the opening price so we are left
with a small green body and a wick to the top and bottom of the candle
Now the price drops further to the original opening price leaving us with just an upper
and lower wick with no body Finally the candle moves down slightly and
closes at this price. The resulting candle has a small red body
as overall the price moved down slightly from the price the candle opened at. We also have an upper and lower wick to show
the highest and lowest price the price action reached during this candle’s time period. Then the next candle opens at the price the
previous candle closed at. And the price continues to fluctuate this
this manor As you may have spotted from that previous
example, it is possible for a candle to form with a very small body or no body at all. We call these candles Doji candles. These candles from when the opening price
and closing price are very close together or the same price. Lastly I just want to explain that there are
alternative methods of displaying price movements on a chart to candlesticks
Within most charting platforms are methods such as line charts, Renko Charts, Range charts,
Heikin-Ashi charts among others. These charts display the price movement in
a different way to candlestick charts which can have its uses for certain trading strategies
although the vast majority of traders use candlestick charts. If you are new to trading I would recommend
sticking with candlestick charts as this is the de facto method for the majority of traders
and it is still the method I use today. I hope you have found this video useful. Thank you very much for watching. If you enjoyed the video, please feel free
to drop a like on it. If you have any questions or want me to cover
any other topics in future videos, please let me know in the comments below. Also subscribe to the channel for more videos
like this one. I will be continuing this trading basics series
to provide new traders with all the knowledge they need to get started. Thank you again and I hope you all have a
good trading week.

7 thoughts on “Understanding Candlestick Charts (Tutorial For Beginners) [Trading Basics Series]”

  1. I m so so confused abt this candle I mean the bull market open from downwards right but how to figure out what's goin on if the wick gets empty at the closing point ….

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