While you first start off in your trading adventure it can seem like a complicated and really a daunting challenge.
I will explain it in a easy manner and a manner that I want someone had explained that to me whilst I first started out. Let’s start with the basics Candle stick the building block of any stock price chart. It tells you precisely what the prices of a stock throughout at any given length.
A stock price chart is made from lots of candlesticks candles have a tendency to be the bullish or bearish. A bullish candle means the price increased over a period of time and bearish means price decreased over a period of time. When I am talking about durations what I mean is that each fully formed candle represents the price movement of a particular term so in case you’re looking at five minute chart then every candle represents 5 minutes really worth of free movement.
Inside the candles themselves we can garner more information the fat rectangular part of any candle is known as the real body what the real body shows us as the specific price action late into the opening and closing price so for the bullish candle the bottom of the candle body shows the opening price on the top of the candle body shows the closing price There are candles that are reversed so the top of the bodies the opening price and the bottom of the body is the closing price since a bearish candle is displaying a price decrease what you’re going to see on charts more often than simply candles with real bodies or candles like this with virtual lines stretching from both ends of the real body.
Each of these candles is the same as in the green kind of still shows a price increase and the red candle a price decrease overtime period the real body of the candle still holds the information of the open and close price of each candle you hear the vertical lines coming off of the candles referred to as different things they’re known as the shot
The lines that appear above and below the body are the shadows. While both can be referred to as wicks, in most cases, the line above the body is referred to as the wick, and the line below the body is referred to as the tail. Regardless of what each line may be referred to individually, they are both considered shadows. The top part of the upper shadow represents the highest value in the data set of a trading session; the bottom of the lower shadow represents the lowest value in the data set.
However, there is much more to shadows on a candlestick. They offer traders and analysts important information about how the security performed during the time period. When a candlestick shows a short shadow, it reveals that the majority of the security’s trading activity occurred between the opening and closing prices of the period. If the shadow is longer, it shows that price activity for the security extended well past the open and/or close.
The upper and lower shadows are commonly unequal. When the upper shadow of a candlestick is longer, it signifies strong action on the part of buyers during the trading session. However, the fact that the closing price of the period is substantially lower than the period high reveals that sellers successfully forced the price back down. A strong high and weak close creates a long upper shadow.
When the lower shadow is longer, it reveals the opposite: sellers controlled the trading session at some point, driving the price significantly down. Buyers then stepped in before the close to push prices back up. It means the session closed strong; thus, the lower shadow is longer.