Overview
Ideally, when analyzing trading data, one would have available a complete dataset of all trades that ocurred over a given period of time. In reality, this is often hard to do. The dataset is large and generally expensive to use. A common simplification is the divide a trading period into multiple subperiods, and then to record only the closing price at the end of the period. (Think for example of the subperiods being a single trading day).
An alternate methodology records 4 prices for each subperiod, the opening price, the closing price, the maximum price over the period and the minimum price. One can get a feel for what happened during the period by looking at this minimal set of prices.
Candlestick Chart
The candlestick chart displays the 4 points in a stick with a fat bar overlayed. The stick is drawn from the maximum price down to the minimum price. The fat bar is drawn from the open price to the close price. By definition, the bar is withing the range of the stick. The bar is usually colored to indicate if the close is higher or lower than the open. If the close is higher than the open, the body is colored green, and if it is lower, it is colored red. (other colors may be used on different platforms)
Named Candlesticks
Certain candlesticks are given common names so that they can be referred to in candlestick pattern descriptions.
- Long Candle :
- Hammer :
- Doji :
Candlestick Patterns and Indicators
Candlestick indicators are numerical values that can be computed from the high, low, close, and open prices.
- Percent Bar :
- Engulfing :
Visualizing Candlesticks
Visualizing