lets you do technical analysis on stock charts, using candlestick charts
to show the price movement of stocks. It's based on the belief that recent stock price movements give insight into the market that may help indicate what the stock will do next. What does this mean and how to candlestick charts work? This post will explain.
Candlestick charting was supposedly invented by the Japanese sometime around 1850 for trading rice. Since then, the concept has been perfected and applied to stocks. Candlesticks are so named because they refer to the visual representation of price movements by a stock, and they look sort of like candlesticks.
Candlesticks contain a variety of information about a stock's price movement in a given time period (often 5 minute, 30 minute, or daily periods): the open, high, low, and closing price during that time period.
If the stock closes the period higher
than its open, the candlestick body is hollow
, and the bottom part of the candlestick sticking down (the "lower shadow") represents the low of the day, the bottom of the body is the open, the top of the body is the close and the top of the "wick" (the "shadow") is the high. If the stock closes the period lower
than its open, the candlestick body is filled
, and the bottom shadow represents the low, the bottom of the body is the close, the top of the body is the open and the top of the upper shadow is the high.
In Stock TickerPicker
, if the period's close is lower than the prior period's close, it is represented by a red candlestick, whereas if the period's close is higher than the prior period's close, it is represented by a green candlestick.
Typically, filled candlesticks indicate selling pressure, whereas hollow candlesticks indicate buying pressure. Generally speaking, the longer the body of the candlestick, the more intense the selling or buying pressure. There are several dozen different unique candlestick formations, which technical analysts try to interpret to understand the pressures up or down that the stock is facing. We'll cover those in future posts.