CANDLESTICK
Back to GlossaryDefinition
A price plot that shows an asset’s open, high, low, and close for a period; patterns are used in technical analysis.
Summary
A candlestick is a visual representation used in financial charts that displays four key price points for an asset during a specific time period: the opening price, highest price, lowest price, and closing price. The 'body' of the candlestick shows the range between open and close prices, while thin lines called 'wicks' or 'shadows' extend to show the high and low prices. Different candlestick patterns help traders and analysts predict future price movements and market sentiment.
Usage Context
Essential for understanding technical analysis, chart reading, and making informed trading or investment decisions based on price patterns and market behavior.
Common Confusions
- Confusing the body with the entire candlestick range
- Not understanding that color indicates whether price went up or down
- Thinking longer wicks always mean more volatility
- Believing single candlesticks are more important than patterns
- Mixing up open/close positions on different colored candles
