If you’re new to technical analysis, learning how to read candlestick charts is a great place to begin. No matter how you choose to trade, understanding candlesticks will help you interpret price action with more confidence.
Candlestick charts can look complex at first, but the basics are easier to grasp than they appear. This guide explains how candlesticks work and how to read them on your Digital Surge chart.
What is a candlestick chart?
A candlestick chart is a type of financial chart that shows how an asset’s price moves over a set period of time. Each candlestick represents one time unit, which can be anything from one second to one year.
Each candle gets its name from its shape, which includes a body and wicks. When you view many candles together, they form a visual timeline of how price has changed over the selected period.
Candlestick charts were first developed by Japanese rice traders in the 1700s, with much of the approach attributed to Homma Munehisa. The same principles remain widely used today across global financial markets.
How a candlestick works
Every candlestick displays four key price points within its timeframe:
Open: The price at the start
High: The highest price reached
Low: The lowest price reached
Close: The price at the end
These values are known as OHLC.
Body and wicks
The body shows the distance between the opening and closing prices. The thin lines above and below the body are wicks, which show the highest and lowest prices reached during the period.
Candle colours
A green candle forms when the closing price is higher than the opening price, showing upward movement.
A red candle forms when the closing price is lower than the opening price, showing downward movement.
How to read candlestick charts
Once you understand the structure of a candlestick, interpreting the chart becomes much easier. Each candle gives insight into buying and selling behaviour during that timeframe.
Some common observations include:
Long bodies often reflect strong buying or selling pressure.
Short bodies may indicate limited movement or market indecision.
Long wicks can suggest price rejection at the high or low.
On the Digital Surge TradingView chart, the default timeframe is 1 hour, so each candle shows one hour of price movement. You can adjust the timeframe in the top left of the chart to zoom in or out. Short timeframes help you view quick price changes, while longer timeframes give you a clearer picture of the overall trend.
Changing the timeframe can make it easier to spot both short term and long term patterns.
Limitations of candlestick charts
Candlestick charts are helpful, but they do have some limitations:
They don’t show exactly how price moved between the open and close.
They don’t reveal whether the high or the low occurred first.
Because of this, many traders combine candlesticks with other tools such as indicators, support and resistance levels or volume data to gain more context.
Final thoughts
Candlestick charts are one of the most widely used tools in technical analysis. Understanding how they work gives you a strong foundation for exploring more advanced techniques and improving your trading analysis.
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