How To Read Candlestick Charts FAST (Beginner's Guide)

Summary

This 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

• 📈 Green candlesticks indicate a bullish market where prices have risen, while red candlesticks signal a bearish market where prices have fallen.
• 🔑 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.
• 📊 A larger candlestick body signifies strong momentum, as the price moved a greater distance, whereas a smaller body indicates weak momentum.
• 🌀 A 'doji' is a small or non-existent candlestick body that suggests indecision in the market, with prices returning close to the opening level.
• ⏳ Candlestick patterns are crucial for understanding market sentiment and the actions of buyers and sellers, which can inform trading decisions.
• 📊 The time frame of the chart, such as daily, weekly, or hourly, determines the duration each candlestick represents.
• 📉 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.
• 📊 A series of red candles typically indicates a downtrend, whereas a series of green candles points to an uptrend.
• 🔄 A mix of red and green candles with sideways movement indicates market indecision and consolidation.
• 📈 Identifying trend changes involves looking for patterns like lower lows in an uptrend or higher highs in a downtrend, which can signal a reversal.
• 📉 Momentum gain can be spotted by increasing candlestick sizes or tight price movements without wide swings, indicating control by buyers or sellers.
• 📈 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

00:00

📈 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.

05:01

📊 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.

10:02

🚀 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.

Keywords

💡Candlestick charts

Candlestick charts are a popular method of visualizing price movements in financial markets. Each 'candle' represents a specific time period, such as a day or an hour, and displays the opening, closing, highest, and lowest prices for that period. In the video, candlestick charts are the central focus, with the narrator explaining how to read them to understand market sentiment and make trading decisions.

💡Bullish

Bullish refers to a market sentiment where investors believe that prices will rise. In the context of the video, green candlesticks are described as bullish because they indicate that the price of an asset, like Apple stock, has appreciated and moved upwards during the time period represented by the candle.

💡Bearish

Bearish is the opposite of bullish and signifies a belief that prices will fall. Red candlesticks in the video are identified as bearish because they show that the price of an asset has depreciated and moved downwards during the time period.

💡Candlestick body

The 'body' of a candlestick represents the range between the opening and closing prices. A larger body indicates strong momentum in the direction of the candle's color, while a smaller body suggests less momentum. The video explains that the body is crucial for understanding the strength of a price movement.

💡Wicks or Shadows or Tails

Wicks or shadows are the thin lines that extend above and below the body of a candlestick. They represent the highest and lowest prices reached during the time period, regardless of the opening and closing prices. In the video, the narrator uses these to illustrate the price extremes for a given period.

💡Doji

A doji is a specific type of candlestick where the opening and closing prices are very close to each other, resulting in a very small body or no body at all. This indicates indecision in the market, as buyers and sellers are equally matched. The video mentions doji as a sign of potential market indecision.

💡Momentum

Momentum in trading refers to the strength or weakness of a price movement. The video explains that a larger candlestick body signifies momentum gain, while a smaller body or doji indicates momentum loss. Understanding momentum is key for traders to anticipate future price movements.

💡Uptrend

An uptrend is a market condition where prices are generally rising. The video describes how to identify an uptrend through higher highs and higher lows on the chart, which indicates bullish momentum and potential buying opportunities.

💡Downtrend

A downtrend is the opposite of an uptrend, where prices are generally falling. The video explains how to spot a downtrend by looking for lower highs and lower lows, which suggests bearish momentum and potential selling opportunities.

💡Price action

Price action refers to the movement of an asset's price over time, which can be analyzed to make trading decisions. The video emphasizes the importance of understanding price action through the study of candlestick patterns to predict future market movements.

💡Trend change

Trend change is a significant concept in trading that signifies a shift from one market trend to another. The video outlines different types of trend changes, such as from an uptrend to a downtrend, which are identified by specific candlestick patterns that indicate a potential reversal in market direction.

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

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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]