An Introduction to Candlesticks

	Module 13: Candlestick Chart Formations
	Lesson 1: An Introduction to Candlesticks
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In our last lesson we finished up our series on technical indicators with a look at the Parabolic SAR. In today's lesson we are going to start a new series on Candlestick chart formations by looking at some of the most common candlestick patterns in the market.

As you should remember from our lesson on the basics of trading charts, candlestick charts display the open, high, low, and close of an instrument and shade the "candle" portion white if the close of the period is greater than the open of the period, and black if the close for the period is less than the open. The high and the low of the period are then connected by a thin line which is referred to as the wick.


Example:

At their most basic candlestick charts give us a picture of how volatile a particular period was and whether buyers or sellers won the trading period the candlestick represents. If a candle is long and white, this tells us that the period started with buyers in control and remained that way as they drove prices higher throughout the period. If a candle is long and black this is an indication of a volatile period where sellers won out over buyers. The less of a wick there is on a long candle the greater the control of either the buyers or the sellers depending on the color of the candle.

Example

Short candlesticks represent periods in the market where the market closed near its open for the period and can represent either periods of little market activity or periods of activity where neither buyers nor sellers gained much ground.

Example

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