In order to accurately read trading charts, you need the opening price, the closing price and the high and low of the day (or whichever timeframe you are using). Candlestick charts are similar to the bar charts as they both display the complete trading range by showing the four important price values: open, high, low, close (OHLC). The main difference is in the body of the chart. After drawing the vertical line to connect the high and the low, just like in the bar chart, and connecting the horizontal dashes, both on the left and on the right, a box is formed. The box is called the body of the candle. The vertical line appearing above the body is called upper shadow. The vertical line appearing below the body is called lower shadow. The body and the shadows form what we call candlestick chart (or candle).

One our students recently asked us this question: "You use the terms over bought and over sold at times. What do they mean? and how can they help to find a profitable chart?" Oversold simply means that the stock price has reached a TEMPORARY bottom and buyer are most likely ready to come in and buy shares. Overbought is the opposite. Stock price has reached a TEMPORARY top and sellers are most likely ready to come in start closing positions or go short. Use oscillators such as stochastics and RSI to visually help you identify when price has reached oversold or overbought conditions. When the lines of the oscillator cross above 80 and higher the stock is overbought. Get ready to sell and close positions. When the lines of the oscillator cross below 20 and lower the stock is overbought. Get ready to buy. Keep in mind that is just one parameter we look at. In your analysis you need to see where support and resistance is and how price behaves around these