Understanding a Candlestick Chart for Beginners

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Understanding a Candlestick Chart for Beginners? Apart from line and bar stock charts, have you ever seen candlestick stock charts? It’s called a stock candlestick.

A stock candlestick is a type of stock chart or stock price chart commonly used in technical analysis. This chart shows the highest price, lowest price, opening price, and closing price of a stock at a certain time period.

This time period can be an hour, a day, a week, or a month. One stock candlestick represents one period. Generally, one stock candlestick represents one day.

Get to know Stock Candlesticks

candlestick patterns

The emergence of stock candlesticks turned out to have an interesting history to observe. Candlesticks were originally a tool used by rice traders in Japan.

The function of this candlestick is to record the market price at any time. Then use that data to project price movements in the coming years.

Furthermore, this method was developed by a rice trader from the country of Sakura, named Munehisa Honma in the 18th century.

It did not stop there, the candlestick calculation model was then popularized by Steven Nison through his book entitled “Japanese Candlestick Charting Techniques.”

Currently, this technique is used in the stock market. Technical analysis of candlestick stocks so can help investors in making their own investment decisions.

Also Read: How To Calculate Stock Price

Learn Stock Candlesticks

candlestick charts free

Learning stock candlesticks can start with basic information, such as the parts of stock candlesticks, stock candlestick colors, and others.

Main components of stock candlesticks

Stock candlesticks have two main components that have meaning, including:

  • candle body (body)

The part of a stock candlestick that shows the opening and closing prices at a specific point in time. The shape is a rectangle in red and green or black and white.

  • Candle tail (shadow/wick)

The section shows the highest and lowest prices of a stock at a given point in time. Shown from a straight line that stretches above and below the body of a stock candlestick of the same color, such as a candle or candle shape.

Red and green stock candlesticks, mean?

Stock candlesticks are presented in red and green. But in some cases, it can also be shown in black and white.

Stock Candlestick Example

Information:

  • High: Highest Price
  • Low: Lowest Price
  • Open: Opening Price (Stock Trading)
  • Close: Closing Price.

Example of BBRI Stock Candlestick

types of candlesticks pdf

How to Read Stock Candlesticks

For those of you who are still confused, how to read pdf stock candlesticks or in other file forms, namely by paying attention to the size of the candle. Stock candlesticks have unequal body and tail sizes.

Looking at the short length of the stock candlestick body

If you see, there are long and short candle bodies on a chart.

  • The longer the body of the candle, the higher the stock buying and selling pressure
  • The shorter the candle body, the less price movement, and stock price consolidation occurs

Looking at the long and short tail of the stock candlestick

The short length of the stock candlestick tail also has its own meaning or meaning.

  • The longer the tail of the candle, indicating some activity or trading transaction far beyond the opening and closing prices at a certain point in time
  • The shorter the tail of the candle, the more trading activity that occurs near the opening and closing prices. Stock price fluctuations are not far beyond the opening and closing prices.

Stock candlesticks, up and down tails are not the same

If a stock candlestick has a longer upper tail and a short lower tail, it means that buyers are dominating the trading session by bidding at a high price. Meanwhile, the seller tries to push the price lower than that price.

On the other hand, the upper tail is shorter and the lower tail is longer, indicating that sellers are dominating the trading session and pushing the price down. But buyers are still bidding at high prices in the session.

Also Read: How To Play The Stock Market For Beginners

Stock Candlestick Patterns

Stock candlestick patterns are stock candlestick patterns that investors and traders use to predict future stock price movements. There are many types of stock candlestick patterns, but the most powerful or have a high level of accuracy as a signpost are five patterns, as reported by Investopedia.

Three Line Strike

A bullish three-line strike is a reversal pattern indicated by three candles in a downtrend. Then followed by the fourth stock candlestick which closes the body of the three candles.

Two Black Gapping

The bearish two-black gapping stock candlestick pattern is a black candle in lows and lowers. This pattern appears after experiencing an upward trend.

A sign of the appearance of this pattern predicts that the decline will continue to lower positions. It might also trigger a broader downward trend.

Three Black Crows

Bearish three black crowds is a reversal pattern indicated by the appearance of three black candles at lows and lowers. This stock candlestick pattern predicts that the decline will continue to lower, perhaps even wider in scale.

Abandoned Baby

A bullish abandoned baby is a stock candlestick pattern that shows signs of a reversal to a stronger direction. This pattern appears after a series of black candles prints lows.

Within the pattern also form a narrow range Doji pattern. Predicts that the recovery will continue to higher levels. Likely to trigger a broader upward trend.

The Doji pattern is a type of stock candlestick which means the opening price and closing price are at the same level or the candlestick has a very short body that resembles a straight line.

Evening Star

A bearish evening star is a stock candlestick pattern that starts with a white candle high that pushes the upward trend to new highs.

But followed by a black candle predicting the decline will continue to lows or lower, even on a broader scale.

Learn Stock Candlesticks for Big Money

Understanding the stock candlestick for a trader or investor is a must. Because this candle pattern is an important part of technical analysis.

That way, you will know where the direction of the stock price movement of an issuer and the JCI going forward. So, it is obligatory to learn stock candlesticks.

Also Read: 30 Best Cheap Stocks to Buy Today

How to learn stock candlesticks can be from anywhere. From books, the internet, attending seminars or training, journals, and so on. If you already know the science of reading stock candlesticks, you can make the right investment decisions.

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