Candlestick charts: What it is and how to read them. Along with the bar and line chart, candlestick chart is another important chart to understand when you learn Forex. Created over 100 years ago in Japan, candlestick chart is now becoming a popular char used in the Forex world. There have been a lot of traders who enjoy using this chart thanks to its wide range of information offered and easy-to-interpret designs. 

What Is Candlestick Chart?

Basically, the chart is called this way because its indicators or markers have a body which resembles the shape of candle with a line on its peak which looks like a wick. In addition, these candles actually have that “wick” as well on the bottom end. On the chart, every candlestick consists of open, low, high and close price for the chosen time frame. 

When using this chart, traders can set the time frame themselves to each candle. For instance, to watch open, close, high and low price over a 10-minute period, you should set the time frame on the chart to 10 minutes. As a result, every 10 minute a new candlestick is generated and it also takes 10 minutes for another one to begin and complete.

How to Read and Interpret a Candlestick Chart

Now, how can we read and interpret a candlestick cart? As mentioned above, there are some components shown on this chart including open and close price as well as high and low price. The wide part of this chart displays the price range between open and close price. Then, it is possible for you to read this chart based on price activity as follow. 

#1 Open Price

It represents the initial price traded throughout the candlestick. It is designated by either the bottom or top of the body. When a price trends up, you will see a green candlestick. On the other hand, when the price trends down, the candlestick will turn into red. The color transforms regarding on whether the price sits below, in red, or above, in green.

#2 High Price

The high price shown in a candlestick chart refers to the highest price traded during the time frame of your candlestick chart. It is indicated by the tail’s top which happens above the body. It is usually called as the upper tail. When the open price happened to be the highest price during your chosen frame time, you won’t see upper tail on the chart.

#3 Low Price

In contrast to the high price, the low price displays the lowest price traded for the period of the candlestick. Low price is pointed out by the foot of the tail which happens below the body. It is generally called as the lower tail too. Similar to high price, when the open price happened to be the lowest price, no lower tail will be shown.

#4 Close Price

The close price refers to the last price traded in the period of the candlestick. It is signified by either the bottom or top of the body. The downward candlesticks display as red while the upward candlesticks display as green. These colors characterize whether the last price or closing price when the candlestick has not yet completed, is below or above the open price.

The Bottom Line of Reading Candlestick Charts

While a candle shapes, but before it finishes, it will continuously change as the price moves. The open price remains the same, but until it completes, the low, high and close can be changed over the time frame. The color can also transform while the candlestick forms. That’s all a little about interpreting candlestick. The last, don’t forget to always learn Forex as you trade!