Understanding Candlestick Charts


hi traders today we’re going to go over everything to do with candlesticks this is to give you a full understanding of all the terms definitions and to allow you to be able to analyze candlestick charts better by having a full and proper understanding of all of the respective parts including doji bars up bars down bars wicks tails and the body of the candlestick first you’ll see here we have a candlestick chart with a lot of extra information on it we’re going to strip all this information away and just leave ourselves with the candlesticks all these indicators that we’re using have a lot to offer us but when we’re looking at purely a candlestick chart they’re just adding extra information on we’ll add these on in later lessons and now we’re left with a simple time-based candlestick chart the first thing I want to talk about is the individual timing of the candlesticks or the period that the candlesticks span now this is completely up to you right here you can see on the upper left hand side we have a 15-minute chart selected with that 15 minutes represents is at the very start of a candlestick will be 15 minutes at the very end of a candlestick will be the end of that 15-minute period of time so that means that in the span of 1 2 3 4 candlesticks this will be a total span of 60 minutes now we can choose any range of times that we’re looking to work with so here we’ll select a 60-minute chart so that means each of these bars represents a 60-minute period of time so at the start of one of these bars say 9:00 a.m. the end of it will be at 10:00 a.m. and the next start of the next bar will be at 10:00 a.m. and it will end at 11:00 a.m. now just quickly looking down on this chart you can see on the bottom portion of the screen we actually have the time for the candlesticks so we can see this red one is 8:00 a.m. so that means it goes from 8:00 to 9:00 and from 9:00 to 10:00 and then from 10:00 to 11:00 we can select a wide range of different time periods to work with we can select all the way down to a minute here easily and all the way up to daily these are just preset times and you can also choose your own unique time periods for your charts for the purpose of this example the time period doesn’t actually matter because we’re looking specifically add the actual candlesticks not the time period they’re within the time period will be very important if you’re applying different strategies because a certain strategy that might work in one time period may not work on another again that’s in a later video when we’re talking the relation between higher and lower timeframes now let’s talk about coloring of the charts when you see here is a quite a standard coloring of the charts green and red bars don’t worry we’ll get into exactly what the difference between green and red bars are but right now we’re just talking about actual coloring of these bars this coloring is completely arbitrary this is just so that we have an easy way to identify the different bars you’ll see often especially in older examples where there’s black and white candlesticks or you’ll see blue and red candlesticks and that is purely a preference setting by yourself if you don’t like the green versus red candlesticks well then you can change it to something else I’ll show you all the amount of different colors you can choose from and how arbitrary a real is if we go into data series we can choose the color for a Down bar or the market move down we’ll get into that in a little bit and there’s a whole range of colors that you can choose from we’ll choose a darker color for down like a dark magenta and for our up bars we’ll choose a light almost almost ivory you can see this makes a chart look a little bit different but the information displayed is identical for the rest of these examples we’ll just be using the standard green and red bars now let’s talk about the body of the candlestick the body of the candlestick is the rectangular either red or green area the difference between the bottom of the rectangle and the top of the rectangle is the difference between the open and the close price of the candlestick how can you tell on a candlestick where the open and the close is well that’s where the colors come into play the open on a green candlestick will be the bottom and the close will be the top so the bottom of the rectangle for a green bar is the open the top is the close this is inverse for red candlesticks a red candlestick the top is going to be the open and the bottom is going to be the closed so this is how we can easily tell if it was a up bar or if it was a down bar an up bar will always be a green so the body or real body as some people will refer to it as the body will always be green and that’s a way that we can quickly see by looking at this candlestick on the left here that the open will be at the bottom the clothes will be at the top so we have a green bar we know the market moved up for that specific period of time on the red bar we immediately see this red so we know that the open will be on the top and the clothes will be on the bottom this is true no matter what time frame you are actually looking at this can be true for an hour 50 minute weekly chart monthly chart even this is a quick way for us to identify if the market in that specific period of time moved up or down and that’s why we choose the different colors for the up bars and down bars to give us a quick visual representation on what the market is doing the next thing you’ll notice with all of these candlesticks on screen is the fact that there are little tails coming out of the top and out of the bottom these well if they are called tails but they can also be referred to as shadows or wicks whichever you choose they’re all the same represent the maximum and minimum price that the market reached during that period of time that that candlestick was open so on a 15-minute chart we see that the market reached a maximum and a minimum but we also see the body so the body represents the open the closed that tells us a lot of information so we know where the market opened for that candlestick where the market reached as a peak during that candlestick and where the market reached as a low during that candlestick and eventually we also know the close of the candlestick so what about a candlestick on the hard right edge of the chart that is still actually forming let’s take a look and we can see we’re at the hard right edge of the market here this is the most recent data that we have received from the exchange and we have a 60-minute chart selected and it is currently 14 minutes past the hour and we can see that our most recent candlestick is right here at 1300 and we actually just saw it move and this is a great example because that shows you that the candlestick on the hard right edge is dynamic its color hasn’t been solidified only once the market moves on to the next period of time that you’re working on so in this case on this 60-minute chart it will be an hour will we actually see the market solidify that candlestick and lock it in as either bearish or bullish a down candlestick or an up candlestick so the only thing that we know for sure on this bar right now is where the open is because we can trace back to the previous candlestick and see that this was a bearish or down candlestick so that means that the bottom of the rectangle here will be it’s close and we can see that that was also the open for the current candlestick there’s one more thing I want to talk about and that’s doji candlesticks a doji candlestick is what we have right here and this happens when the market opens and closes at or near the same level leaving us with no breather red or green rectangle we can still see the high point with the wick or tail here and we can also still see the low point with the tail this still gives us a lot of information and these doji candlesticks definitely stand out in your chart and we’ll go into a few strategies with trading on these in a later video right now we’re just going over terminology so you fully understand candlesticks so you can look at any candlestick chart and understand it quickly and easily and know all of the respective parts so let’s do a quick summary on the candlesticks that we see right here so starting from the left we see a doji candlestick that means that the open and closed were at or near the same level we can still see the tails representing the high and the low that the market made during that period of time and we’re working on a 60-minute chart we look in the upper left hand side so that means that this candlestick was one hour in length starting at looking at the bottom 1300 and that means ending at 1400 the next one over we can see that it’s a red bar so we know it’s going to be a down bar so that means that the open of the period of time of this hour will be at the top the clothes will be at the bottom and that is the difference that the market made from the open and closed during this one-hour period we also see the same tails so we know the high the market made and the low the market made the next candlestick we see that it’s green so we know to look for the open of that candlestick at the bottom and the close at the top same thing with the wicks or tails we see the high and the low the market made let’s pop back and take a look at the original chart now we can see clear areas where the market was moving up or down or stagnating we can see doji candlesticks and we can see down bars and up bars it gives us a way to quickly analyze and look at this chart and understand the movements that were happening in the market now let’s talk about discrepancies in the opens and closes now if you look at this green bar we see it’s a green bar so that means it’s a nutbar so we’re looking for the open at the bottom of this green rectangle and the close at the top of this green rectangle the next bar is going to be a red bar so we see that the open will be at the top of this red rectangle and the closed will be at the bottom of this red rectangle now if we look closely the top of this green rectangle and the top of this red rectangles don’t quite match up what this means is the fact that the last traded price for this 60-minute period here or this candlesticks period was slightly different than the first traded one of the next pair or the next candlesticks period this isn’t something you’re going to have to worry about too much but I just want to let you know this so that if you see the candlesticks opens and closes and opens not quite line up don’t worry because what it’s actually doing is printing the last traded price for this candlestick as it’s closed and the first traded price for this candlestick period as it’s open so there may be a slight discrepancy in some candles between there opens and there closes but this is just because it’s printing as accurate as information as possible on the chart another subject I’d love to go into right now is price versus value of a candlestick but that’s going to have to be for another video this was Bruce banks and as always enjoy trading

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