In this video we'll take a look at how to read and analyze a candlestick if you're going to use Candlestick
charts to profit.
Obviously you need to know how to read candlesticks.
Now most of you would be familiar with a chart like this simple line chart and it just simply plants
a dot at the closing price.
In this case every four hours and then connects them for a line you can see price has been falling but
with candlesticks you can see much more information because it shows you specifically every four hours
what had happened.
It shows you the sentiment of the market the momentum of the market the things that truly move the market
candlesticks hearken back to the Japanese rice futures markets a couple centuries ago.
Three or four hundred on the top of my head so it's been around for a while.
It's just recent that the West has picked up on it though they do come in a multitude of colors but
typically you're going to see red and green being red being negative.
Green being positive or black and white black being negative white being positive so you can see each
one of these candlesticks has little bits and pieces that make up the candlestick itself.
So I'll go ahead and give you an idea as to what we're looking at here.
You have what is known as the body.
This is the colored part and then you have Wicks.
Hence the name candlestick because it looks like a candlestick with the wicks sticking out so how do
you read this.
Well the first thing that you need to know is the color matters.
There is a color to it green or red.
Then it tells you that the mark and either rose or fell during that timeframe.
So if this is a four hour candle and this Bonnie is green that means it went higher during that four
hours.
The one difference might be sometimes on churning platform you'll see like a black candlestick if it's
a completely unchanged candle.
For example but at this point let's assume that the body is green.
So the highs and lows are the wicks.
So you can see that the low is here and the high was there.
And again we know this because this Bonnie is going to be green and I'll go ahead and color that in
with my screenwriting tool here.
So that's a green Bonnie.
That's a positive candle.
So what is the body itself mean well besides the fact that we have gone higher the Bonnie shows the
opening and closing price.
Well if it went higher then obviously the bottom of the body was where we opened and the top is where
we close.
So think of it this way.
We opened here.
We fell a bit.
We rallied all the way up here and then close up here.
We closed higher.
Then we started.
Now let's go ahead and draw out another candlestick and this time I will make it a negative candlestick.
So this is going to be red.
The body is red.
We have opened up higher than we closed.
So at this point.
Go ahead.
Put some wicks on
and you can see that that's the low that's the high that's the entry and that's the exit the exits lower.
So this gives you an idea as to what's going on during that four hours and the other thing that I would
point out is the size of the body matters and why does that matter.
Because it shows the distance from open to close it shows true conviction or lack of.
So for example I see a candlestick here that may not look overly exciting but it but in hindsight it
truly was.
And the reason was because the body was the entirety of the candle.
So think about that.
That means during this four hours we jumped in here and just went straight up.
It wasn't the biggest candle that we've ever printed in the rural market but it certainly was positive.
So was this one you can see that the high was just above.
There is no way here we never dropped below that.
So the size of the body truly matters and it works both ways.
That's a very negative candle.
It's not a 100 percent thing but typically if you follow just the impulsive candles that will get you
on the right side of the market.
But of course you can see that we do pullback.
I mean think of it this way it had you bought ripple there and you saw this very negative candle with
a very long red body.
You know to perhaps be cautious.
And that's the sentiment mind set of the candle each candle tells a story or tells a chapter in the
overall story that is the market.
And that's what we're going to look at in this course.
So now that you understand the makeup of the candlestick we can move further.