What is a candlestick & how does it work?

A candlestick's shape varies based on the relationship between the day's high, low, opening and closing prices. Candlesticks reflect the impact of investor sentiment on security prices and are used by technical analysts to determine when to enter and exit trades.

What is a candlestick chart?

Candlestick charts are an effective way of visualizing price movements invented by a Japanese rice trader in the 1700s. Astute reading of candlestick charts may help traders better understand the market’s movements. Candlesticks summarize a period’s trading action by visualizing four price points: A chart’s time period is typically user-defined.

Why do traders use Candlestick charts?

Traders use candlestick charts to determine possible price movement based on past patterns. Candlesticks are useful when trading as they show four price points (open, close, high, and low) throughout the period the trader specifies. Many algorithms are based on the same price information shown in candlestick charts.