Candlestick Charts for Intraday
Trading
Trading is an
art and not everyone can be successful at it. To become a profitable trader it
is important to learn about reading the price charts. A chart represents the two
most important inputs for technical analysis; price and volume. The data on the
chart helps to visualize the price of a stock going forward. The Candlestick
chart is one of the most popular charts used by traders. It is known as a candlestick
chart because, in this type of chart, the price graph is represented in the
form of a series of candles.
What does Candlestick Chart Comprise of?
Below is the
graphical representation of a candlestick chart. In this chart, the price
movement is represented in the form of candles. It consists of red and green
candles. Each candle tells about the opening, closing and trading price range
in a particular time frame. A trader can find out the appropriate time for
entry and exit using a candlestick chart.
Different Types of Candles
On a candle
stick chart, you will find red and green candles. Each candle reveals the price
range in a different time frame. The red candle represents the closing price
after the end of a particular time period that is lower than the opening price.
Whereas, the green candle represents the closing price after the end of a
particular time period that is higher than the opening price.
Body of Candle
The portion of
the candle highlighted in red or green colour represents the body of the
candle. The area of the candle comprises of opening and closing prices. In the
red candle, the upper body is the opening price and the lower body is the
closing price. On the other hand, in the green candle, the upper body is the closing
price and the lower body is the opening price.
Candlewick
Candlewick means
the upper and lower shadow on the candle. It represents the price range of
stock in particular time duration. When the upper wick in a red candle is short
it means that the stock has opened near the high of the day. When the upper
wick of the green candle is short it means that the stock has closed near the
high of the day.
Candlestick Chart Patterns
The candlestick
chart patterns are one of the best ways to identify sentiments towards a stock.
It helps in understanding the bulls and bear sentiment. By reading the chart
patterns the trader can find out the price at which demand or supply would be
higher and much more. When a single candle has so much information, then the
patterns of the candle can give much more information. Pattern identification
can be done by comparing a candle with the preceding candle and the candle that
comes after it. This makes it important to understand candle patterns
appropriately and with the right understanding, you will be able to make better
trades in the stock market.
Different Types of Chart Patterns
The candlestick
chart patterns can be divided into two parts; bullish pattern and bearish
pattern. Bullish pattern includes hammer pattern, inverse hammer pattern, morning
star pattern, bullish engulfing pattern, etc. The patterns that are useful in
the bearish market include shooting star pattern, evening star pattern, hanging
man, etc.
Before starting your
trading journey you need to go learn the different candlestick chart patterns.
This will help you in becoming a successful intraday trader and make your
journey in the stock market profitable.