Candlesticks

What is a Candlestick?

Type of price chart used in TA that displays the high, low, open and closing prices of a security for a specific period.

• Rectangular sections are known as the real body, representing the range between the session’s open and close
• Thin lines above and below are the shadows, representing the session’s price extremes
  • Shadow above is the upper shadow

Shadow below is the lower shadow

Characteristics of the Candlestick

1. When the real body is black (or red), it means that the close of the position is lower than the open
2. When the real body is white (or green), it means that the close was higher than the open
3. Peak of the upper shadow is the high of the session
4. Bottom of the lower shadow is the low of the session
5. If candle has no upper shadow, it is said to have a shaven head
6. If the candle has no lower shadow, it is said to have a shaven bottom

Limitations of Candlesticks

• Does not provide price targets, require western technicals or trend analysis to forecast price targets
• Candlesticks and by extension reversal patterns does not signal the extent of the move, only the reversal of a trend

Price Target: Analyst’s prediction of a security’s future price