Structure of Candlestick Charts

Candlestick charts are based on the same market data as regular bar charts but present that data in a different way. The components of candlestick charts are the opening price level, the closing price level, the high price, and the low price of any data compression rate, be it weekly, daily or intraday data. Figure 3.12 shows the composition of a candlestick.

I Hicji I Hicji a ose a Open

Body I Body

Y Open Y a ose

Figure 3.12 Constituents of candlesticks.

The relationship between the open price level and the close price level forms the body of the candlestick chart. If the close is below the opening, the body is black. If the close is above the opening, the body is white. The opening and closing price of every data compression— weekly, daily, or intraday—is, therefore, important for analysts who use candlestick charts.

The price moves above and below the candlestick body are called the "shadow." Depending on how large the distance is between high and low of a price bar to the body of the candlestick, the shadows can be long or short.

In Figure 3.13, we compare a bar chart and a candlestick chart based on the same open, high, low, and close data.

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