Candlesticks make up price charts and basically measure or quantify price action over a certain period of time.
As you can see above a candle stick is made up of a body and upper and lower shadows.
You will also notice in the illustration above that there are two candle sticks and they are different colours. This is because one represents a candle that contains upward price action and the other contains downward price action, in this case they are black and white but candles come in many colours depending on your charts and personal taste.
The upward candle is white and you can tell that it is a bullish candle because the open price is at the bottom. So as the candle opens, and the price goes up, the closing price will be somewhere above the opening price, thus displaying the open price at the bottom of the candle.
And the closing price is at the top, and vice versa for the downward candle.
This example shows what a chart using candlesticks looks like:
You can see clearly that as price goes lower this is represented on the charts by the formation of several black downward candles, and as the price goes higher this is shown with the formation of several white candles
Candlesticks are one of the more popular methods used by traders to quantify price action and are used in many different time frames to measure price action.
It’s beneficial if you can learn as much about candlesticks as you can because there is so much information on them they could be the subject of their very own course!
But the aim of this section is to merely introduce you to the concept of them; you’ll learn more details in our free advanced course.
Next: Fibonacci