Candles charts: what you need to know and how to use them
Candlestick charts are one of the oldest charting methods, developed in 18th-century Japan to analyze price movements in the rice market. Candlestick patterns often reflect sentiment through their visualization of price dynamics over a specified period. Today, candlestick charts are widely used in technical analysis along the line and bar charts and is considered one of the most informative tools in the financial industry.
Each candlestick consists of two components:
- The body, representing the range between the open and close prices.
- The shadows (or wicks), extending from the top and/or bottom of the body, indicate the high and low prices during the specified timeframe. The shadows reflect the price extremes within the given period.
The color of a candlestick conveys the price movement within the interval:
- Green candlesticks: The open price is at the lower edge of the body, and the close price is at the upper edge.
- Red candlesticks: The open price is at the upper edge of the body, and the close price is at the lower edge.
Enabling the chart type
Once you are on the Supercharts, open the chart type menu on the upper toolbar, and select Candles.
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Settings
To make the most of the candlestick chart, customize it according to your preferences and needs.
To do this, choose Settings on the upper toolbar, and go to the Symbol tab.
The first section, Candles, lists settings specific to the chart type:
- Color bars based on previous close. With this setting on, the color of each bar will be determined by whether its close price is higher (green) or lower (red) than the close price of the previous bar, rather than by the bar's own open and close prices.
- Body. Change candle bodies' outlook for enhanced visual appearance.
- Borders. Change the color of the candles' edges.
- Wick. Choose the preferred color of the candles' shadows.
To maximize the utility of candlestick charts, use Candlestick pattern indicators. To do so, go to the upper toolbar and select Indicators → Technicals, choose Patterns, and scroll down to find Candlestick patterns indicators.
These automated tools detect specific candlesticks and candlestick patterns and provide insights into their potential implications. However, one should evaluate the broader context and not rely solely on automated indicators to make trading decisions.