How To Read Candlestick Charts FAST (Beginner's Guide)
Summary
TLDRThis video tutorial offers a comprehensive guide to interpreting candlestick charts, a vital tool for traders. It explains the significance of green (bullish) and red (bearish) candles, the meaning of their bodies and wicks, and how their sizes indicate market momentum. The tutorial also covers the importance of understanding candlestick patterns for making informed trading decisions. Practical examples using Apple stock illustrate the concepts, and the video encourages viewers to engage by suggesting topics for future content.
Takeaways
- π Green candlesticks indicate a bullish market where prices have risen, while red candlesticks signal a bearish market where prices have fallen.
- π The body of the candlestick represents the opening and closing prices, with the wicks (shadows or tails) showing the highest and lowest prices within the period.
- π A larger candlestick body signifies strong momentum, as the price moved a greater distance, whereas a smaller body indicates weak momentum.
- π A 'doji' is a small or non-existent candlestick body that suggests indecision in the market, with prices returning close to the opening level.
- β³ Candlestick patterns are crucial for understanding market sentiment and the actions of buyers and sellers, which can inform trading decisions.
- π The time frame of the chart, such as daily, weekly, or hourly, determines the duration each candlestick represents.
- π Red candles with a higher open and lower close indicate a bearish trend, while green candles with a lower open and higher close suggest a bullish trend.
- π A series of red candles typically indicates a downtrend, whereas a series of green candles points to an uptrend.
- π A mix of red and green candles with sideways movement indicates market indecision and consolidation.
- π Identifying trend changes involves looking for patterns like lower lows in an uptrend or higher highs in a downtrend, which can signal a reversal.
- π Momentum gain can be spotted by increasing candlestick sizes or tight price movements without wide swings, indicating control by buyers or sellers.
- π Momentum loss is indicated by wide price swings after tight movements or shrinking candlestick sizes, suggesting a potential price reversal.
Q & A
What is the significance of green and red candlesticks in candlestick charts?
-Green candlesticks are bullish, indicating that the price appreciated and went upwards for the time period. Red candlesticks are bearish, indicating that the price depreciated and went downwards for the time period.
What is the Candlestick body, and what does it represent?
-The Candlestick body, also known as the real body, is the rectangular area of the candlestick. It represents the price range between the opening and closing prices for the given time period.
What are the Wicks, Shadows, or Tails of a candlestick, and what do they indicate?
-The Wicks, Shadows, or Tails are the lines that stick out above and below the Candlestick body. They represent the highest and lowest price points of the time period, with the top wick indicating the highest price and the bottom wick indicating the lowest price.
How do you determine the opening and closing prices for green and red candlesticks?
-For green candlesticks, the opening price is at the bottom of the Candlestick body, and the closing price is at the top. For red candlesticks, the opening price is at the top, and the closing price is at the bottom.
What does the size of the Candlestick body indicate about market momentum?
-A larger Candlestick body represents momentum gain as the price traveled a greater distance during the time period. A smaller Candlestick body represents momentum loss as the price traveled a shorter distance.
What is a Doji in candlestick charts, and what does it signify?
-A Doji is a very small Candlestick body or one that is close to non-existent. It signifies indecision from buyers and sellers because the price swung up and down but closed near the same price it opened, indicating no clear direction.
Why are candlestick patterns important for traders?
-Candlestick patterns are important because they tell a story and reflect the actions of buyers and sellers. They provide insights into market sentiment and can help traders make informed trading decisions based on price action.
How can you identify the time frame of a candlestick chart?
-The time frame of a candlestick chart is indicated by the symbol next to the time period. For example, '1D' represents a daily time frame, '1W' represents a weekly time frame, and '1H' represents an hourly time frame.
How do you interpret the trend of a market based on the number of green and red candlesticks?
-More red candles than green indicates a downtrend or bearish price action, while more green candles than red indicates an uptrend or bullish price action. A mix of both colors with sideways movement shows indecision and consolidation.
What are the three types of trend changes from an uptrend to a downtrend as described in the script?
-Type 1 is a lower low forming after an uptrend. Type 2 is a lower low forming after a lower high pullback. Type 3 is a lower high forming before a trend change breakout and lower low.
How can you identify a sideways ranging market in candlestick charts?
-A sideways ranging market is identified by the price making the same highs and lows and moving in a sideways direction. In such markets, traders can take trades in both directions with confidence.
Outlines
π Introduction to Reading Candlestick Charts
This paragraph introduces the video's focus on teaching viewers how to read candlestick charts quickly. It explains the significance of green and red candlesticks, which represent bullish and bearish market movements respectively. The candlestick body, or 'real body,' and the wicks or shadows that extend from it are described, with their positions indicating the opening and closing prices. The size of the body is emphasized as an indicator of momentum, with larger bodies signifying stronger momentum. Doji candlesticks, which show indecision, are also introduced. The importance of understanding candlestick patterns for making trading decisions based on price action is highlighted.
π Analyzing Candlestick Patterns and Price Action
This paragraph delves into the practical application of candlestick chart analysis. It explains how to interpret the opening and closing prices of assets like Apple stock using candlestick charts. The paragraph illustrates how to read the daily, weekly, and hourly time frames on the charts and how to identify the date and price of a specific candlestick. It also discusses the implications of various candlestick patterns, such as a predominance of red or green candles indicating bearish or bullish trends, respectively. The concept of uptrends, downtrends, and sideways markets is introduced, along with the significance of momentum gain and loss as seen through candlestick size and color changes.
π Advanced Candlestick Analysis Techniques
The final paragraph discusses advanced techniques for analyzing candlestick charts to identify trends and momentum shifts. It explains how to recognize uptrends and downtrends by looking for patterns of higher highs and lows or lower highs and lows, respectively. The paragraph also covers various types of trend changes, including the formation of lower lows after an uptrend and higher highs after a downtrend. Additionally, it addresses how to identify momentum gain through tightening price movements and increasing candlestick sizes, as well as momentum loss through wide price swings and shrinking candles. The importance of trading in the direction of the identified momentum is emphasized. The paragraph concludes with a call to action for viewers to visit the website for more advanced trading content and to engage with the community on social media.
Mindmap
Keywords
π‘Candlestick charts
π‘Bullish
π‘Bearish
π‘Candlestick body
π‘Wicks or Shadows or Tails
π‘Doji
π‘Momentum
π‘Uptrend
π‘Downtrend
π‘Price action
π‘Trend change
Highlights
Green candlesticks are bullish, indicating price appreciation and upward movement.
Red candlesticks are bearish, indicating price depreciation and downward movement.
The candlestick body represents the opening and closing prices for the period.
Wicks or shadows indicate the highest and lowest prices during the period.
A larger candlestick body signifies momentum gain due to greater price movement.
A smaller candlestick body indicates momentum loss with less price movement.
A doji represents indecision in the market as price swings up and down but closes near the open.
Candlesticks are important for understanding market sentiment and making trading decisions.
Candlestick patterns reflect the actions of buyers and sellers in the market.
The time frame of the chart affects how each candlestick represents a unit of time, such as daily or weekly.
The price of an asset can be determined by hovering over the candlestick to see the open and close prices.
A downtrend is indicated by more red candles than green, showing depreciation of the asset.
An uptrend is shown by more green candles than red, indicating appreciation of the asset.
Consecutive green candles signal upward momentum, while consecutive red candles signal downward momentum.
A mix of red and green candles indicates indecision and consolidation in the market.
Trend changes from uptrend to downtrend can be identified by lower lows or lower highs after a series of higher highs and higher lows.
Trend changes from downtrend to uptrend are marked by higher highs or higher lows after a series of lower highs and lower lows.
A sideways market is characterized by same highs and lows, moving in a horizontal direction.
Momentum gain can be identified by tight price movement or increasing candlestick size in a trend.
Momentum loss is indicated by wide price swings after tight movement or shrinking candlestick size.
A candle color change after consecutive candles of the same color can signal a loss of momentum.
Transcripts
in this video we're going to show you
everything you need to know about
reading Candlestick charts fast here's
exactly what we'll be covering in this
video
as always if you want more videos more
often please hit the like button as it
allows for our team to keep producing
videos on YouTube now here's how you
actually read a candlestick
green candlesticks are bullish because
price appreciated and went upwards for
the time period red candlesticks are
bearish because price depreciated and
went downwards for the time period this
rectangle area is known as the
Candlestick body or the real body
these lines that stick out above and
below the Candlestick body are known as
the Wicks or Shadows or tails
for green candlesticks the opening price
is at the bottom of the Candlestick body
and then the close price is at the top
of the Candlestick body
for red candlesticks the opening price
is at the top of the Candlestick body
and the closing price is at the bottom
of the Candlestick body the wick ends at
the top represent the highest price
point of the time period the wick ends
at the bottom represent the lowest price
point for the time period
now what does the size of the
Candlestick body tell you
the bigger the Candlestick body
represents momentum gain as price
traveled a greater distance during that
time period
the smaller the Candlestick body
represents momentum loss as price
traveled a shorter distance during that
time period
when you have a very small Candlestick
body or close to no body this is known
as a doji which represents indecision
from buyers and sellers because price
swung up and swung down during that time
but then closed close to the same price
as where it opened from which means
buyers and sellers got nowhere and again
shows indecision
now before we show this on the charts
why are candlesticks important to
understand
candlesticks tell a story and are a
reflection of what buyers and sellers
are doing meaning the Candlestick
pattern that forms at that particular
Moment In Time tells you a lot about
what is going on in terms of the buying
and selling occurring in the market so
Traders will look at Candlestick
patterns and the movement of
candlesticks to make trading decisions
which is also known as price action now
let's go through this right on the
charts
this here is the asset you are looking
at and in this case it is the Apple
stock
this here is your time frame right now
it shows 1D which translates to the
Daily time frame meaning every
Candlestick you see represents one day
of time if we were to switch this to the
weekly time frame it would show one W
and then every Candlestick you see on
screen would represent one week of time
if we were to switch this to the one
hour time frame it would show one H and
then every Candlestick on screen would
represent one hour of time this bar
below tells you the date and time so if
you take your mouse and place it on top
of this candle here
you'll see the dotted lines connecting
the candle to the scale below which
shows the date as January 3rd
if you move your mouse one candle to the
right you'll see one day later which is
January 4th
again because you are on the daily time
frame every Candlestick represents one
day of time
now this bar to the right tells you the
price of the asset
let's say you want to know the price of
this green candle here remember green
candlesticks open below at the bottom of
the rectangle here and close above at
the top of the rectangle here so if you
want to know the opening Price Place
your mouse at the bottom of the
rectangle and notice how the dotted
lines connect the candle to the scale on
the right and it shows 126 dollars and
five cents which means when the market
opened on January 6 the Apple stock was
trading at 126 dollars and five cents
now if you want to know the closing
price place your mouse at the top of the
rectangle
look to the scale on the right and
notice how it says
129.61 which means when the market
closed on January 6 the Apple stock
finished trading at
129.61 this is why green candles are
bullish because price opened at 126
dollars and five cents and closed at
129.61 meaning the Apple stock
appreciated
3.56 on the trading day of January 6
which is bullish price action because
buying interest in the stock drove price
upwards now the wick below is the lowest
price that the Apple stock reached that
day
place your mouse at the bottom of the
wick
and it shows
124.90 as the day's lowest price
now the wick above is the highest price
that the Apple stock reached that day
place your mouse to the top of the wick
and it shows 130 dollars and 30 cents as
the day's highest price
so let's say you want to know the price
of this red candle here remember red
candlesticks open above at the top of
the rectangle here and close below at
the bottom of the rectangle here for the
opening price of January 3rd place your
mouse at the top of the rectangle and it
shows 130 dollars and twenty four cents
for the closing price of January 3rd
place your mouse at the bottom of the
rectangle and it shows 125 dollars and
13 cents
this is why red candlesticks are bearish
because price open at 130 dollars and 24
cents and closed at
125.13 meaning the Apple stock
depreciated by five dollars and eleven
cents on January 3rd which is bearish
price action
the wick below is the lowest price that
the Apple stock reached that day
place your mouse at the bottom of the
wick and it shows
124.21 as the day's lowest price
the wick above is the highest price that
the Apple stock reached that day
place your mouse at the top of the wick
and it shows
130.93 as the day's highest price
so if you want to use the exact same
charting platform we are using right now
go to tools.wisetrade.com
now when you see more red candles than
green candles this represents a
downtrend and bearish price action and a
depreciation of the asset as Sellers and
bears continue to sell more of the asset
causing the push downwards when you see
more green candles than red candles this
represents an uptrend and bullish price
action and an appreciation of the asset
as buyers and Bulls continue to buy more
of the asset causing the push upwards
when you see a bunch of green candles
together one after the other this Show's
price is gaining more upwards momentum
when you see a bunch of red candles
together one after the other this Show's
prices gaining more downwards momentum
when you see a mix of both red and green
candles together and sideways price
movement this shows indecision
consolidation in a choppy Market so
before we continue we want to hear from
you tell us in the comments below right
now what topics we should cover next as
we always look at the comments to decide
on next video topics
[Music]
also please hit the like button as it
allows for our team to continue to
produce free YouTube videos
so how do you identify an uptrend
you have your runs here
and your pullbacks here
which means an uptrend makes higher
highs and higher lows
from a price action standpoint a moving
uptrend shows bullish momentum and that
the buyers are in control so you lean
towards taking long entries to trade
with the moving upwards herd momentum
so now how do you identify a trend
change from an uptrend to a downtrend
type 1. you have your moving uptrend
through the higher highs and higher lows
before a lower low forms signaling a
trend change from an uptrend to a
downtrend
type 2 you have your moving uptrend to
the higher highs and higher lows before
you have a lower low form
followed by a lower high pullback before
the full Trend change breakout and lower
low
type 3
you have your uptrend through the higher
highs and higher lows before you have a
lower high that forms signaling a trend
change from an uptrend to a downtrend
so how do you identify a downtrend
you have your runs here
and your pullbacks here
which means a downtrend makes lower
highs and lower lows
from a price action standpoint a moving
downtrend shows bearish momentum and
that the sellers are in control so you
lean towards taking short entries to
trade with the moving downwards herd
momentum
so now how do you identify a trend
change from a downtrend to an uptrend
type one you have your moving downtrend
to the lower highs and lower lows before
a higher high forms signaling a trend
change from a downtrend to an uptrend
type two you have your moving downtrend
the lower highs and lower lows before
you have a higher high form followed by
a higher low pullback before the full
Trend change breakout and higher high
three you have your movie downtrend
through the lower highs and lower lows
before you have a higher low that forms
first followed by a trend change
breakout and higher high
so how do you identify a sideways
ranging Market
price is making same highs and same lows
and moving in a sideways Direction
in markets like this look to take trades
in both directions with confidence
so how do you identify momentum gain
the first way to identify momentum gain
is to look for tight price movement in
an uptrend notice how prices vary tight
together without wide swings which shows
buyers are in full control and that not
enough sellers are in the market to
cause swings in the opposite direction
you want to trade with this upwards gain
of momentum and not against it
in the opposite direction in the
downtrend notice again how price is very
tight together without wide swings which
shows that sellers are in full control
and that there are not enough buyers in
the market to cause swings in the
opposite direction you want to trade
with this downwards gain of momentum and
not against it
so the second way to identify momentum
gain is candles growing in size in an
uptrend notice how each candle is
getting larger and larger and moving a
greater distance per candle which shows
a gain in bullish momentum you want to
trade with this gain of momentum and not
against it
and then a downtrend notice again how
each candle is getting larger and larger
and moving a greater distance per candle
which shows a gain and bearish momentum
you want to trade with this gain of
bearish momentum and not against it
so how do you identify momentum loss
the first way to identify momentum loss
is to look for wide swings of price
after tight price movement so this
uptrend here is tight price movement
which means the buyers are in full
control you then had wide swings
occurring which shows momentum loss and
that the buyers are no longer in
complete control and can lead to a
possible reversal of price if paired
with Trend change price action going in
the opposite direction
this downtrend here is tight price
movement which means the sellers are in
full control you then had wide swings
occurring which shows momentum loss and
that the sellers are no longer in
complete control and can lead to a
possible reversal of price if paired
with Trend change price action
the second way to identify momentum loss
is to look for shrinking candles in a
downtrend notice how you start with a
big red candle and then every candle
after gets smaller and smaller which
shows a loss of downwards momentum as
the distance traveled per candle is less
and less this can lead to a possible
reversal of price
in an uptrend notice how you start with
a big green candle and then every candle
after gets smaller and smaller which
shows a loss of upwards momentum as the
distance traveled per candle is less and
less this can lead to a possible
reversal of price
the third way to identify momentum loss
is to look for a candle color change
after you have consecutive candles of
the same color in the downtrend notice
that you have all right candles before a
green candle appears this shows momentum
loss because price failed to produce
another candle with a lower low closing
price and instead made a higher closing
price through the green candle this can
lead to a possible reversal of price
in an uptrend notice how you have all
green candles before a red candle
appears this shows momentum loss because
price failed to produce another candle
with a higher high closing price and
instead made a lower closing price
through the red candle this can lead to
a possible reversal of price
if you want to take your trading to the
next level head on over to our website
at ystrade.com as we have a ton of
content on our site that won't ever be
available on YouTube
make sure to hit the like button on this
video as it allows for our team to
continue to produce more free videos on
YouTube also make sure to follow us on
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thanks for watching and I'll see you in
the next episode
[Music]
thank you
[Music]
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