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How To Read Candlestick Charts

Candlestick pattern is one of the most powerful stock patterns for swing trading. It can predict the stock movement with certain accuracy allowing a trader to profit from buying and selling a stock in short term trading.

Candlestick Chart Pattern

The above pattern is the candlestick formation of a positive day. The "Open" indicates the open price of a stock, "Close" indicates the closing price, "Low" indicates the low of the stock and "High" indicates the highest trading price of the stock. On a positive stock day, the candlestick body is white. The following stock pattern is a formation of a stock down day. As you can see, the only differences is the body of the candlestick pattern where it is now a red body. When we plot all these individual candlestick patterns on a chart, we are able to predict whether or not a stock will go up. Of course, just like any other technical indicator, candlestick pattern is a predictive tool, but it is not 100% accurate as nothing can predict the stock market with 100% accuracy.

How to read candlestick charts

When connecting all the individual candlestick pattern, we get a whole candlestick chart. The following is a sample Google chart that easily shows the stock is hitting a support. Also, notice that I highlight the candlestick pattern where it indicates buying signals. These are extremely powerful candlestick formations where a trader can take advantage of. I will discuss each of these powerful candlestick patterns in my other posts as each pattern requires a lesson of its own. This article will introduce you how to read basic candlestick charts so that you have an understanding on how they work and how you can apply candlestick patterns to your trading. Check out this candlestick patterns article to learn more on how candlestick charts work.