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How to read candlestick charts

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).

If the closing price is higher than the opening price, the color of the candle is green. If the closing price is lower than the opening price, the color of the candle is red.

The size and the color of the body, and the length of the shadows reveal very important information regarding the current market direction, possible market reversals and the strength of future price movements.

Candlestick charts can be used as a tool to benefit from reversal patterns and continuation patterns during bullish markets (uptrends) as well as bearish markets (downtrends).

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Good Trading!


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All the information shared is provided for educational purposes only. Any trades placed upon reliance of SharperTrades, LLC are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, cryptos, commodities, options, forex and other trading securities, there is also substantial risk of loss. All trading operations involve high risks of losing your entire investment. You must therefore decide your own suitability to trade. Trading results can never be guaranteed. SharperTrades, LLC is not registered as an investment adviser with any federal or state regulatory agency. This is not an offer to buy or sell stocks, cryptos, forex, futures, options, commodity interests or any other trading securities.

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