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Let Candlestick Charts Lead The Way

January 26, 2012 by   Filed under Trade Like A Pro, Understanding Candlesticks

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Charts are like maps, the more information each chart provides the more likely you will reach your destination safely. Candlestick charts provide a more detailed and accurate map of the market than bar, line, or point and figure charts.

I love candlesticks because they are so visual. You can quickly identify who is winning the battle between the buyers and sellers. I have my down bars set as red and up bars set as green. A quick glance is all I need to get a general feeling of what a stock or market is doing.

Candlesticks help bring the chart to life by showing not only the trend but the strength of the trend. Bar chart techniques can often take weeks to signal a reversal. Candlesticks can give you visual hints to the changes in days allowing the professional trader to make more timely trades.

How Candlesticks are Drawn

The thin line in the middle of the chart (the wick) represents the distance the stock has traveled during the time period. It consists of the high, the low and everything in between.

The body of the candle is drawn between the opening and the closing prices of the time period.

If the closing price is higher than the open it is called a white real body bar. (As I mentioned I have my software set up to make these bars green for up)

If the closing price is lower than the open it is called a black real body bar, (Mine are Red for down)

While individual candles should not be used to enter or exit trades, they still are very helpful in telling the story of the stock. The features such as the size of the candle, the color of the body, the length of the shadows, and which side of the candle has a larger shadow (or tail) can quickly tell you who is winning the battle between the buyers and sellers.

There is so much that can be learned from candlestick charts. To trade without them is a mistake.

Stay tuned for more in depth lessons on candlestick charts.

Don’t be left in the dark, let candlesticks lead the way!

If you want to find a good place to do your candlestick charting, click the picture below to recieve free charting software.

Free Real time stock quotes

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