The candlestick chart may well be the most useful chart for any investor. Once you get the hang of them, these charts are very easy to read. Best of all, they provide tons of information in a very small amount of space. By quickly glancing over candlestick charts, trained investors can glean huge amounts of information about markets and the performance of a particular stock or other financial vehicle.
As you’ve probably guessed, the icons in candlestick charts resemble candlesticks. Candlestick charts can tell you what the opening price, high price, low price, and closing price of a stock is. Still, for the uninitiated, this type of chart can be a bit difficult to read. Let’s go over some basics so you can learn how to read these charts.
When you look at a candlestick chart, you should notice a number of small black and white boxes. On top of and below each box there will be a line extruding from the box. Each line is referred to as a shadow. The upper shadow represents the asset’s high price for the trading session, while the lower shadow corresponds with the low price.
As we said earlier, each box will be black or white. A white box will mean that the asset’s prices rose. A white box will also mean that the top edge of the box was the asset’s closing price and the bottom edge was the opening price. A black box means just the opposite. The asset’s price fell. The top edge of the box will correlate to the opening price while the bottom edge will represent the closing price.
This probably sounds like a mouthful but don’t be intimidated. Candlestick charts can be a bit difficult to read at first, but with just a few minutes of effort, you’ll most likely get the hang of them. And once you do, you’ll almost certainly find that candlestick charts are a great way to learn about almost any financial investment vehicle and its past performance. In turn, this can help you make sound investment decisions.