Candlestick Chart

The Candlestick Chart is a graph that displays stock prices using a style that closely resembles a series of candlesticks.  Each candlestick represents one time period, either one day, week or month. 

Candlestick Chart

The Candlestick Chart is a graph that displays stock prices using a style that closely resembles a series of candlesticks.  Each candlestick represents one time period, either one day, week or month. 


Candlestick Chart Description

 Each candlestick is constructed as follows:

  • A color for the candlestick is chosen:      
    • "Up Day" (Close > Open):   choose a color such as white or blue
    • "Down Day" (Close < Open):  choose a color such as black or red
    • Neither Up nor Down (Close = Open):  keep color from previous candlestick or draw in black
    • A filled rectangle is drawn between opening and closing prices. The filled rectangle is called the Real Body.
    • A line is drawn from the high price to the top of the rectangle. This line is called the Upper Shadow.
    • A line is drawn from the low price to the bottom of the rectangle. This line is called the Lower Shadow.
Candlestick Charts:  Candlesticks and Their Properties

'Candlestick Chart' Interpretation

Candlestick charts are convenient because the technical analyst can quickly see the price action based on the candlestick colors.  Specific candlestick patterns consisting of 2, 3 or more candlesticks have been characterized as either bullish or bearish.  Used in isolation, candlestick patterns generally do not provide a significant trading advantage.  However they may prove to be a powerful tool when used in conjunction with other indicators.

Types of Candlesticks

  • Candlestick Stars have small real bodies which gap away from a large real body that precedes it.
  • Doji candlestick is when a stock's open and close are the same price or very close to the same price.
  • Gravestone Doji has a long upper shadow and no lower shadow, and it forms when the open, low and close are equal.
  • Hammer forms when a stock moves significantly lower after the open, but rallies to close well above the intraday low.
  • Long Day  candlestick represents a large price move from open to close, where the length of the candle body is long.
  • Long Shadow  candlesticks have one long shadow and one short shadow.
  • Tall Shadow candlesticks have an upper shadow that is long and a lower shadow that is short.
  • Long-Legged Doji candlesticks have long upper and lower shadows with the Doji in the middle of the day's trading range.
  • Long Tail candlesticks have an upper shadow that is short and a lower shadow that is long.
  • Short Day candlesticks represent a small price move from open to close, where the length of the candle body is short.
  • Spinning  Tops candlesticks have a long upper shadow, long lower shadow and small real body.

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