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A candlestick consists of a real body (rectangle part of the candle) and shadows or wicks (lines above or below the body). Each candlestick also consists of an open, high, low and close prices. Traders based on his trading horizon set the time frame of the candlestick chart.

Interpreting Candlestick in Candlestick Chart

Open - The open is the first price traded and is indicated by either the top or bottom of the body of the candlestick.

High - The high is the highest price traded during the time period set for the candlestick, and is indicated by the top of the shadow that occurs above the body (called the upper shadow).The high price could be the open, close or a high hit within the time frame of the candle. If the open is the highest price then there will be no upper shadow.

Low - The low is the lowest price traded during the candlestick, and is indicated by the bottom of the shadow that occurs below the body (called the lower shadow).The low could also be one of the three prices open, close or a low price hit within the time frame of the candle .If the open is the lowest price then there will be no lower shadow.

Close - The close is the last price traded during the candlestick, and is indicated by either the top or bottom of the body.

Range - The price difference between the upper and lower shadow indicates the range the price moved during the time frame set for the candlestick. It is calculated by subtracting the high from the low of the candlestick. Range indicates the volatility associated with the candlestick. The higher the range, the higher is the volatility and vice versa. (Range = High - Low). 

Usage of Candlesticks

Candlesticks tend to form patterns which are interpreted by traders to identify a continuation or reversal of the existing trend. It is also used to spot short term trading opportunities. Candlestick patterns should