Easy To Interpret
Many technical analysis patterns and trends are named after the shapes that they resemble when examined in chart form. Any introduction to candlesticks will tell you that these charts consist of open, low, high and also close values for certain stocks over certain time periods that eventually come to resemble candlesticks. Many people say that this is the easiest type of technical analysis chart for beginners to interpret..
It’s important for new investors to recognize the significance of each part of this chart formation. The shape of the candle stick can be either solid or hollow, and either way, this main part of the shape is known as the body or real body. Bodies will always have long, skinny lines attached to them at the top and bottom, and these can be called shadows, wicks or tails. Typically, the shadow will represent the high and low ranges that the price of the stock has reached. .
If you were to set out to do a candlestick chart without the aid of a computer tracking program, you would need to secure a data set that gave you the daily open, low, high as well as close values for each period of time you wanted to analyze, whether it’s a single day, a week, or a year. Once you have this data, you could begin recording it on the chart in the form of candlestick shapes so that a more comprehensive analysis could be conducted. If you had a situation in which a stock closed at a price that happened to be higher than what its opening price was, you would draw a candlestick with a hollow body, and the bottom edge of the body would represent the opening price while the top of the body represents the closing price. If you were to have information that a stock had closed with a price that was lower than its opening price, you would want to draw a filled candlestick where the top of the body represents the opening price and the bottom of the body represents the closing price.