Interpreting The Signs
Technical analysts depend on the candlestick stock charts to relay information about the movement of stock prices in an easy to understand format. Early Japanese rice traders are thought to be the first ones to use this early form of technical analysis, as a way to help them anticipate the direction of prices for their commodity of choice. When you are a new investor, it’s important to become familiar with all facets of this basic chart, including the red candlestick, and what they mean.
The candlestick shapes on this stock charts are used to represent highs and lows during a day of trading. Besides being hollow or filled, you might also notice that some of the candlesticks are colored or white. On a candlestick chart, the red candlestick represents a negatively sloped movement in the underlying price of a certain stock. Just like white candlesticks, the red candlestick communicates high, low, opening and closing prices for a certain time period, which could be a day or a month. When it is found that the closing price is lower than the period’s opening price, it’s traditional for the body of the candle to be colored red or black.