Level 1
Anatomy of a candle
By the end of this chapter you can read a candle's four prices, say what the body and the wick tell you — and what colour and shape do NOT — and see the same day at two scales.
In this level
- What does a price chart show?A price chart is a record of trades that actually happened. The horizontal axis is time, the vertical axis is price. Every point you see is a moment when a buyer and a seller…
- What is a candle? The four pricesA candlestick condenses four prices from your chosen time slice into one shape: the open, the close, the high and the low. The thick part between open and close is the body; the…
- Bullish candle, bearish candleA candle's direction comes from a single comparison: where did the close finish relative to the open? If the close is above the open, the candle is a bullish candle, usually drawn…
- Body and wickThe length of the body shows how decisive the move of that period was. A long green body says price was carried firmly upward from open to close; a long red body is the same…
- Green or red?Colour says one thing only: the direction. Close above the open and the candle is drawn green; close below it and the candle is red. That is all. Colour does not say how…
- The story of a single candleSome candle shapes have names of their own. A candle with almost no body is a doji: open and close are nearly the same, and neither side won the period. A small body with a long…
- TimeframesThe timeframe is how much time each candle summarises. On a daily chart every candle covers one day; on a 1-hour chart, one hour. A single daily candle is really twenty-four…