Candlesticks are a popular charting tool used in technical analysis to represent price movements of an asset, such as a stock, commodity, or currency, over a specified period of time. These charts provide traders with a clear visual representation of market trends and are essential for understanding the buying and selling activity in the market.

A candlestick consists of four key components:

1. Open: The price at which the asset was traded when the period (e.g., 1 minute, 1 hour, 1 day) began.
2. Close: The price at which the asset was traded when the period ended.
3. High: The highest price reached during that time period.
4. Low: The lowest price reached during that time period.

Structure of a Candlestick:

• Body: The rectangular part of the candlestick, which is the area between the open and close prices. If the close is higher than the open, the body is typically green or white, indicating a bullish (upward) movement. If the close is lower than the open, the body is usually red or black, indicating a bearish (downward) movement.
• Wicks (or Shadows): The thin lines above and below the body that show the highest and lowest prices reached during the time period. These represent the extremes of price action.

Types of Candlestick Patterns:

Candlestick charts can form different patterns that help traders predict future price movements. Some common patterns include:

• Doji: A candlestick with a small body, signaling indecision in the market.
• Hammer: A candlestick with a small body near the top and a long lower wick, suggesting potential bullish reversal.
• Engulfing: A pattern where a smaller candlestick is followed by a larger one that “engulfs” it, often signaling a reversal.

Traders use these patterns to analyze trends and make informed decisions about when to buy or sell. Candlestick charts are an essential tool in forex, stock, and other financial markets, helping traders gauge market sentiment, potential reversals, and price targets.