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Candlestick, Candlestick Paterns & Correlation - cTrader

Tsar, Thu Mar 08, 2018 2:27 am

Candlesticks are an efficient way to view an asset's price chart. Candlesticks quickly show which way the price moved during a specific time period using colors, as well as how far the price moved during that period.

Candlesticks are popular because of their visual appeal, compared to bar or line charts.
Each "candle" represents a certain amount of time, which is selected in the trading platform or in the chart settings.




The Candle Code indicator is used to assign a numerical value to each candle based on Five candlestick characteristics, including Body Color, Body Size, Upper Shadow, Lower Shadow, and Gap.

Positive candle code values represent Bullish candles while Negative candle code values represent Bearish candles.
The more positive the code, the more Bullish the Candle. The more Negative the code, the more Bearish the candle.

Each of the five candle characteristics can be weighted according to the user's preferences.
A Higher Weight will make that characteristic have a greater influence on the codes value.
A Weight of zero will cause that characteristic to have no influence on the code.





Candlestick charts are a popular chart choice among traders, because of the wide-range of trading information that they represent. Candlestick charts are also easy to read and interpret.

Candlestick charts consist of a Body (fat part of Candle) and Tails or Wicks (thin lines above or below the Body).
Each candlestick includes an Open, High, Low and Close price for the Time Frame.



Candlestick Charts are read and interpreted as follows (view a full-size chart example here) :

Open - The open is the first price traded during the candlestick, and is indicated by either the top or bottom of the body. In the example chart, the upward candlesticks are colored green, and the downward candlesticks are colored red. The color is based on whether the price is above (green) or below (red) the open price during the time frame of the candlestick.

High - The high is the highest price traded during the candlestick, and is indicated by the top of the tail that occurs above the body (called the upper tail). If the open was the highest price during the time frame then there will be no upper tail.

Low - The low is the lowest price traded during the candlestick, and is indicated by the bottom of the tail that occurs below the body (called the lower tail).

If the open was the lowest price during the time frame, then there will be no lower tail

Close - The close is the last price traded during the candlestick, and is indicated by either the top or bottom of the body. In the example chart, the upward candlesticks are colored green, and the downward candlesticks are colored red. The color is based on whether the closing price (or last price, if the candlestick is not completed) is above or below the open price.

While a candle is forming (not yet completed), the candle will constantly change as the price moves. The open stays the same, but until the candle completes, the high, low and close could all change. The color may also change while a candlestick is forming. It may go from green to red, for example, if the price is above the open price, but then drops below it. When the time frame for the candle ends, the last price is the closing price, and then the candle can no longer change. A new bar forms to show how the price moves over the next time segment.

Direction - The direction the price moved during the time frame of the candle is indicated by the color of the candlestick. If the candlestick is green, then the price closed above where it opened.

If the candlestick is Red, the price closed below where it opened. These represent upward and downward movements, respectively. Green and Red are common Candlestick colors, but the Colors can be altered to suit a Trader's visual preference. Other common colors are White or Blue for upward movement, and Black for downward movement.

Range - The price difference between the upper and lower tails show the range the price moved during the time frame of the candlestick. The range is calculated by subtracting the high from the low (Range = High - Low). Wide-ranging bars indicate a lot of volatility, while candlesticks with a small range indicate complacency and a lack of volatility.


Learning how to read Candlesticks (or another chart type) is one of the Very First steps in learning how to Day trade. Once comfortable with reading a chart, then move on to studying other aspects of technical analysis and developing a Trading Strategy.
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