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Technical analysis guide

Candlestick Pattern Basics

Big Idea: Reading candlestick patterns is very important in price action-related trading in technical analysis. The understanding of candlestick pattern formations often leave clues about what will happen next in that particular market. If used effectively, they can create profitable trading setups. But, the first step to reading patterns is by understanding the candles themselves.
Image 1

How to read candlestick patterns

Image 1 shows a bullish candle and a bearish candle. They contain candle bodies and their wicks. The candle bodies are the thick green and red rectangles, and their wicks are the thin white lines. The wicks cover where price has moved throughout a specific period of time, otherwise known as the price’s highs and lows. The bodies show where prices opened and closed for the day. The bottom of a green candle’s body shows where the market opened, whereas the bottom of a red candle’s body shows where the market closed. The top of the green candle is where the market closed, and the top of the red candle is where the market opened.

Key Takeaways

Technical analysis begins with reading candles
Understanding candles can help lead traders to profit
Green candles’ bodies open at the bottom of the body
Red candles’ bodies open at the top of the body
The wicks display the candle’s highs and lows

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