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The Anatomy of a Candlestick - Beginners Guide

Professor Hootsworth
Professor Hootsworth
Oct 22, 2024
Candlesticks are a popular charting tool used in technical analysis to understand price movements in financial markets, such as stocks, cryptocurrencies, and forex. They originated in Japan in the 1700s and are now widely used by traders globally.
The length of the bodies and the wicks, in absolute terms and relative to each other, can tell us a great deal about market sentiment over the duration of any given candle in a candlestick chart.
The Body: The thick part of the candlestick represents the difference between the opening and closing price.
If the close is higher than the open, the body is typically colored green or white (bullish candle).
If the close is lower than the open, the body is colored red or black (bearish candle).
The Wicks (or Shadows): Thin lines above and below the body, representing the high and low prices reached during the period.
Candlestick sizes refer to the various lengths and proportions of the candlestick's body, wicks (also called shadows), and the overall structure, which is significant in technical analysis, especially in trading and chart patterns.
Large Body: Indicates a strong price movement. A large green (bullish) body shows a strong buying pressure, while a large red (bearish) body shows strong selling pressure.
Small Body: Reflects indecision in the market. Small bodies can suggest consolidation or a balance between buyers and sellers.
Candlestick size and proportion are key in reading market sentiment and potential trend reversals.
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