What is a Candlestick Chart and How To Read It?

October 26, 2015

Candlestick chart is a graphical representation of an asset, or if we are talking about Forex, of a currency pair. In Meta Trader 4, which is the most popular Forex trading platform, a trader can use 3 different options for reading the chart:

A Bar chart

bar chart  forex bar chart

A Line chart

forex line chart  line chart

A Candlestick chart

a candlestick chart  a candlestick chart

The most common and mostly used graphical representation is the Candlestick chart, or known as well as Japanese candles (see also About Japanese Candlestick Charts) Candlestick shows the information about the price in a relevant time frame, and the relationship between the open, close, high, and the low prices. Candlestick Charts offer identifiable patterns which Forex traders uses in order to predict  price movements.

There are 2 main types of candles, “Bull Candle” and “Bear Candle”.

A red candle (a Bear candle) represents a Bearish Pattern. Bearish Candle is used when the closing price is lower than the opening price.

A green candle (a Bull candle) represents a Bullish Pattern.
Bull Candle is used when the closing price is higher than the opening price.

How to read a candlestick chart?

There are 2 main types of candles, “Bull Candle” and “Bear Candle”. A red candle (a Bear candle) represents a Bearish Pattern. Bearish Candle is used when the closing price is lower than the opening price. A green candle (a Bull candle) represents a Bullish Pattern. Bull Candle is used when the closing price is higher than the opening price.

In addition, the Candlestick provides us with important information regarding the price fluctuations within the time period it represents.

In the following image we can see an illustration of 2 candles – one Bullish and one Bearish. As you can see each one of them provide us with information.

how to read a candlestick chart

Here are the important details you really need to know:

Open – show us the opening price within the time period the candle represent.
Close – represents the closing price within the same time period.
Low – this is the lowest level the price reached during this time period.
High – the highest level the price reached during this time period.

Every trader can personalize the candle colors representation on his Forex trading account; Most Forex traders prefer the green color for an up-going movement, and the red color for a down-going.

Read the related: Understanding Candlestick Patterns

Candlestick Chart - fx childsplay

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