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Understanding Candlesticks
The Candlestick
Imagine a simple line graph for a moment. Each piece of data is represented by a single point and these points are then connected. One to the next. This is helpful to smooth out noise, but far too much useful information is lost.
Enter the candlestick. In its most basic form, a candlestick is nothing more than a data packet. The data packet consists of a solid “body” and two thin lines called “shadows” or “wicks” Additionally, the candles are coded by color to represent rising or falling price (generally green and red).
Deciphering the Candlestick
BODY: This is a visual representation of the DIFFERENCE in opening and closing price in a given time period.
SHADOW or WICK: This shows how much the price moved with respect to the body of the candlestick. The longer the shadow the more volatile the price.
Breaking it down further:
Each candle is a glimpse into the market. When there are more sellers than buyers the price goes down. It will continue going down until there are enough buyers to stop the downward trend. When the price goes up there are more buyers than sellers. There is nobody to buy from and thus the price will rise until it is at a level sellers can no longer resist.
When buying and selling interest is about the same the price remains static.
When there is a large imbalance between buyers and sellers the price can move rapidly up or down.
The following paragraphs will teach you how to use candles to spot these changes in market attitude.
Messages in Candlesticks
BODY:
The size of the body illustrates the difference between opening and closing price. A large body that is followed by rising prices points toward buying interest. The market often moves sharply in that direction.
If the size of the body continues to INCREASE it is an indication of trend and momentum.
When the body size begins to DECREASE it points to decreased interest and a slowing of trend or momentum.
When bodies remain the same size it indicates a stable market or trend.
SHADOW:
The shadow represents the entire range of price change over a given time period. Remember the body shows the OPEN and CLOSE, but the shadow represents the entire price range in the period.
The longer the shadow the more volatile the price in a given direction. A long shadow indicates indecision between buyers and sellers.
A short shadow is a sign of stability.
THIS IS KEY: The difference between a real trend and a false breakout often lies in the shadows. A true trend has short shadows which represent market stability.
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© Stock Scalpers LLC.
Virginia Beach, Virginia
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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musicguru : I’m new to all this, so pls bear with me: how do I see candlesticks on my Quotes for IntraDay? Is there a view I need to select?
The Stock Scalpers OP musicguru : Click on the chart settings and select the candles from the menu that pops up.
treydongui : i like the direction your going pertaining to edu. content. Great work bro![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
musicguru The Stock Scalpers OP : Thanks mate! My settings appear slightly different from yours but I guess they will do for now. Following you!
musicguru The Stock Scalpers OP : Sorry one more thing: Is the candlestick option not available for Intraday graph? It seems to only be available when I select 1m, 5m, 1D etc.
The Stock Scalpers OP musicguru : The biggest difference I see is that you're still in the 1day. Absolutely no problem there so long as that's the time frame you intend to trade it.
Maybe try experimenting with the frames that work best for you. I personally am a 3-5m for trades and 10-15m to scan kind of guy. But that's just me
Longer term holds I'm working in the longer time frames.