Candlestick Charts
Candlestick Charts: The Most Popular Choice
Candlestick charts originated in Japan over 200 years ago, where rice traders used them to track market prices. Today, they are the most widely used chart type among stock traders worldwide, including on the NSE. They display the same OHLC data as bar charts but in a much more visual and intuitive format.
Anatomy of a Candlestick
Each candlestick has three parts:
- The body — The thick rectangular section between the open and close prices. This is the most important part of the candlestick.
- The upper wick (shadow) — A thin line extending above the body to the highest price of the period.
- The lower wick (shadow) — A thin line extending below the body to the lowest price of the period.
Colour Matters
The colour of the body tells you instantly whether the price went up or down:
- Green (or white) candle — The close is HIGHER than the open. The stock went up. The bottom of the body is the open, and the top is the close.
- Red (or black) candle — The close is LOWER than the open. The stock went down. The top of the body is the open, and the bottom is the close.
Reading the Story
Imagine looking at a daily candlestick for Equity Group (EQTY):
- A long green body means strong buying pressure pushed the price up significantly from open to close.
- A long red body means heavy selling drove the price down from open to close.
- Long wicks show that the price was pushed to extremes but was pulled back before close — a sign of resistance or support at those levels.
- A small body with long wicks on both sides shows indecision — buyers and sellers are fighting, and the market is unsure which way to go.
Why Candlesticks Are Preferred
The coloured bodies make it extremely easy to scan a chart and quickly see the balance between buyers and sellers. Patterns formed by multiple candlesticks can signal potential reversals or continuations, which we will explore later in this track. On Stockr, you can switch to candlestick view on any NSE stock chart to get this deeper level of insight.