How To Read Candlesticks? A Beginners Guide To Candlesticks
There are many types of chart patterns are available. Candlesticks chart pattern is most widely used pattern. As it show more information about price at particular time. candlesticks shows OLHC (Open, Low, High, Close) of particular time.
There are various types of candles. They works best under certain conditions.
We will learn, how to read candlesticks? How they get formed? And reason behind their formation?
History
Candlestick charts are thought to have been developed in the 18th century by Munehisa Homma, a Japanese rice trader.
Candlestick Description
Candlesticks show four most important points. Where the candle open, low of candle, high of candle and close of candle.
The area between the close and opening price is called real body. Price excursions above and below the real body is called wicks or shadows. Wicks shows the highest and the lowest traded price of an asset for particular time.
Bullish Candle
The bullish candle is formed when candle closes above opening price. Price moves from down to up. When opening price is below the closing price of candle it is a bullish candle. And the portion between the opening and closing price is real body. When price goes below the opening price it forms low of the candle. And when the price reaches highest price of the candle it is said high of the candle. You can set any color to bullish candle.
Most Bullish Candle
This candle is form when there are more buyers than sellers. No one wants to sell or everyone wants to buy. This is the strongest bullish candle.
After this candle, We may see continuation in the market. This candle forms at the breakout of a pattern, reversal and in the continuation of a trend.
2nd Most Bullish candle
This candle is the second most bullish candle. In this sellers also take part. After opening the candle, sellers try to move down the price, but then more buyers come and move the price up. And finally buyers move the price to almost high of the candle.
After this candle, there are very less sellers in the market. This candle best works at reversal.
Normal bullish candle
This is a normal bullish candle. Here are buyers and sellers both take place. After opening the candle, sellers try to move the price down. After moving price down by some points buyers come. Buyers move price till high. Again sellers come and move price below the high of the candle.
You will find this candle when there is consolidation in the market. After this candle market may or may not be continue.
Neutral Bullish candle
As name suggest it is a neutral candle. Neither buyers nor sellers win here. After opening the candle sellers move the price down to low. Then buyers move the price till high of the candle. Again sellers come and move price down, and closes just above the opening price.
You will see this candle at reversal or in consolidation market when there is indecision in the market.
Least bullish Candle
This is a least bullish candle. Here bullishness is very low as compare to other bullish candles. After opening the candle buyers try to move the market up. But then, sellers move the market down. Candle closes just above opening price.
This candle works best at reversal point.
Bearish Candle
The bearish candle is formed when price closes below the opening price. The portion between opening and closing price is real body. When price moves above the opening price it forms high. When price reaches lowest price, it is said a low of candle.
Most Bearish Candle
As name suggest this is the most bearish candle. This candle is opposite of most bullish candle. Here, only sellers are interested. No buyer want to buy here. After opening the candle sellers move the price down till low of candle. Candle closes near the low of the candle.
This candle is mostly seen at the breakout or at reversal pattern. After this candle trend may continue.
2nd Most Bearish Candle
This candle is second most bearish candle. Here, buyers also take part. After opening the candle, buyers try to move the price high. Then, sellers move the price down near the low of the candle and closes there.
Here, are more sellers than buyers.
You will see this candle at reversal or in continuation. This candle works best at reversal.
Normal Bearish Candle
This is a normal bearish candle. Here, sellers and buyers both take part. After opening the candle, buyers move the price till high. Then sellers move down the price till low of the candle. And closes just above low of the candle.
This candle is seen at consolidation. After this candle market may or may not be continue.
Neutral Bearish Candle
This candle is same as bullish neutral candle. The only deference is that, price closes just below the opening price. After the opening of the candle buyers move the price up till high of the candle. Then, sellers move the price down till low. Again buyers move price little bit up.
This candle forms when there is consolidation in the market. This candle shows indecision in the market.
Least Bearish Candle
This candle is least bearish in nature. After opening the candle sellers try to move the price down. Then buyers move price up. And candle closes just below the opening price. Here, buyers are also interested. It is called as a hammer.
This candle can be seen in reversal or in trend continuation. This candle best works at reversal.
Final Thoughts
Learning about candlesticks is the beginning of the technical analysis journey. Candlesticks plays very important role in technical analysis.