candlestick chart
A type of financial chart showing price movements with candle-shaped bars displaying open, high, low, and close prices for each time period.
Example
“The candlestick chart showed a 'hammer' pattern — a bullish reversal signal with a long lower wick.”
Memory Tip
CANDLESTICK = shows 4 prices per period. Body = open to close. Wicks = high and low extremes.
Why It Matters
Candlestick charts help traders and investors visualize price movements quickly and identify trends, support, and resistance levels. Understanding this chart type is essential for making informed decisions about when to buy or sell securities, as it reveals market sentiment and potential turning points in price action.
Common Misconception
Many people think candlestick charts are only useful for day traders or advanced investors, but they are equally valuable for long-term investors monitoring weekly or monthly trends. The chart format itself does not change the quality of information, just the time period being analyzed, making it useful for any investor regardless of their trading frequency.
In Practice
If you were analyzing Apple stock on a particular day where it opened at 150 dollars, rose to 155 dollars, fell to 148 dollars, and closed at 152 dollars, the candlestick would show a green body from 150 to 152 dollars with a wick extending up to 155 dollars and another wick extending down to 148 dollars. This single candle tells you the complete price journey in seconds, much faster than reading narrative descriptions of the day's trading activity.
Etymology
Named for the candlestick shape of the bars — the body shows open and close, the wicks show high and low.
Common Misspellings
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Related Terms
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See Also
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