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Candles In Candlestick Charts - Quick Intro
Authored On: 13-Jun-15
Last Modified: 13-Jun-15
About. . .
Article gives a quick introduction to the beginners about, what an individual candle represents in candlestock charts
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Technical charts for stock (or underlying security) charts are meant to present primarily the price of the stock
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However, there may be additional information that may be presented along with prices. E.g. volume i.e. total number of traded stocks could also be represented.
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However, as far as price is concerned, there are four prices to be considered for any chart depending upon each of the time-units for which the charts are drawn.
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Those four prices are Open Price, High Price, Low Price and Close Price
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Thus for charts that draw prices for each of past days, 'day' is time unit and Open Price represent the price at which stock opened in morning, High Price presents highest price it reached during the day, no matter at what time, Low Price represents lowest price reached during the day and Close Price is price at the end of trading day.
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For charts that draw prices intra-day, i.e. within a single day, if the chart is 1-minute chart, then those open to close prices are referring to each of single minutes, as presented on chart.
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And these four prices are presented using simple figure of 'candle' on candle stick charts as shown below.
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However, when Open Price is less than Close Price, i.e. when stock opened higher and closed lower, the candle color is represented by red as shown below.
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Also note that top edge of candle now represent Open Price and bottom end represents Close Price
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It is possible that for the time duration for which candle is drawn, the Open Price = Highest Price, and candle may look like below one
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Similarly when Open Price = Lowest Price, candle may look like below one
Summary Lines:
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Candles on candlestick charts provide easy way to show all four prices, which are important to the time unit for which the price chart is drawn