What is a Candlestick chart?

Candlestick charts are a type of price chart that is used to track the price movements of a security over time. They were first developed in Japan hundreds of years ago, and they have since become one of the most popular types of charts used by traders and investors around the world.

Candlestick charts are made up of individual candlesticks, each of which represents crucial information about the movement of price in a particular time-frame. Each candlestick has four key components; Open, Close, High and Low. Open is the price at which the asset initially opened at, likewise, close the price that the asset closed at (most commonly at the end of a day). High is the highest price the asset touched in that time period while low represents the lowest.

The body of a candlestick is the area between the open and close prices. If the body is filled in red, it indicates that the close was lower than the open (a bearish candle). If the body is green, it indicates that the close was higher than the open (a bullish candle).

The shadows of a candlestick are the lines that extend above and below the real body. The upper shadow shows the highest price that a security traded on a given day, and the lower shadow shows the lowest price that a security traded on a given day.

Candlestick charts can be used to identify a variety of different price patterns, which can help traders and investors to make better trading decisions. Some of the most common candlestick patterns include:

- Bullish engulfing : This pattern occurs when a large bullish candle engulfs a smaller bearish candle.

- Bearish engulfing : This pattern occurs when a large bearish candle engulfs a smaller bullish candle.

- Hammer : This pattern is a bullish reversal pattern that occurs when a long lower shadow is accompanied by a small body.

- Doji : This pattern is a neutral pattern that occurs when the open and close prices are very close together with little to no body.

Candlestick charts can be a valuable tool for traders and investors who are looking to identify price patterns and make better trading decisions. However, it is important to remember that candlestick charts are not a foolproof way to predict the future. It is always important to do your own research and to use other technical analysis tools in conjunction with candlestick charts.

Here are some of the benefits of using candlestick charts:

- They provide a more detailed view of price movements than other types of charts like line or bar chart.

- They can be used to identify a variety of different price patterns and candlestick patterns to predict bullishness or bearishness.

- They can be used to confirm other technical analysis signals, indicators and oscillators.