A candlestick chart can give traders various information. It also has an informative design that allows traders to read that information easily. Thus, many traders continuously use candlestick charts.
As the name suggests, it has a body shaped like a candle. It has a line on top that looks like a wick usually called a shadow or tail. Inside the chart, every candlestick represents the open, high, low, and close price for the time decided by the traders.
For instance, if a trader sets the time frame for five minutes, then, a new candlestick will appear every five minutes.
Open price
The open price will be shown by the top or bottom of the candle real body. It depends on the price direction of the asset, whether it moves higher or lower during the time frame set.
If the price moving higher, the candlestick will have green or white color and the open price is at the bottom. On the other hand, if the price movement goes down, then the candlestick will be red or black, while the open price is at the top.
High price
The top of the shadow or tail above the body indicates the high price of an asset during the candlestick period. If the highest price is in the open or close, there is no upper shadow.
Low price
The bottom of the shadow or tail below the body indicates the low price. While there is no lower shadow whenever the open or close is the lowest price.
Close price
The last price traded during the candlestick is the close price. The top (of a green or white candle) or the bottom (of a red or black candle) of the body indicates the close price.
Close price constantly changes as the new candle formed and the price moves. The only price that stays in the open.
Besides, the color of the candle may also change every time the new one appears.
Price direction
You can analyze the price direction by looking at the changes in the candle’s color and position during the time frame. The green candlestick shows the price closed above the open price. This candle is above and to the right of the previous candle.
In contrast, red candlestick shows the price closes below the open price. It is below and to the right of the previous candle again unless it has a different color than the previous candle. The price direction usually forms candlestick patterns that help traders manage their investment.