Introduction to Candlestick Patterns

Introduction to Candlestick Patterns

Candlesticks in trading reveal a lot of information, provided you can understand their coded language.

To comprehend what candlestick represent, you need to start from the very basics. First and foremost, you need to understand what information is disclosed in an individual candle.

Let's analyze the figure shown below. To simplify it, consider that the candlestick in the following figure represents the Daily time frame. Each candlestick informs you about the instruments’ price at the candlesticks’ opening time (which, in case of a daily time frame, is the start of the trading session), instruments’ highest and lowest daily price, and the candlesticks’ closing price (price that was recorded at the end of the trading session). Overall, it depicts the battle between Bulls (buyers) and Bears(sellers) in a daily timeframe.

So, now that you know that an individual candle reveals all this information, you can begin to imagine how much information is hidden in a combination of candles. As you can see, learning and understanding candlestick patterns is a skill that every trader should possess.

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The Highest Price of The Day

The Opening Price

The Lowest Price of The Day

The Closing Price

The Closing Price The Opening Price

A RED or BLACK Candle tells you that the opening price is lower than the closing price, while the GREEN or WHITE Candle informs you that the candle closed at the higher price than it has opened.