Trading stocks in the stock market today requires investors to have as much information as possible on both the stock pick they are looking to invest in, as well as on the stock market. There are obvious reasons as to why you would need this information. To get into a stock at the right time, you need to be know how it has performed in the past to present day, and you need to consider the direction the market is moving in. Candlestick charting is one important tool that can help you with your stock picking, and help you predict where the market may make a reversal.
The information that you get from a stock chart can help you identify more than the closing or opening price of a stock. Bar charts are widely used to convey easy to read information on the open, close prices, and the lows and highs of a stock in a trading day. These bar charts are also called OHLC bar charts, and they offer the investor a visual picture of how a stock has traded. Candlestick charting offers additional information, which makes it a more superior tool to use in chart analysis.
Technical analysts require as much information possible on a stock so that they can perform technical analysis. Candlestick charting is easy to read and interpret, while at the same time providing information on the open, close highs and lows, and levels of activity in the stock. The candles used in the charts look just like a candle, but with a wick at each end. The wicks are normally called shadows, and the body of the candle is referred to as the real body. Each candle on a chart may represent a day. The top and bottom ends of the candle’s body shows the open and close prices, and the shadows show the highs and lows of the stock.
The candles can appear black or white, or in some charts, red and green. If a candle is black or red, it means the stock closed lower than its opening price. If it is white or green, it shows that the stock closed higher than its opening price. The length of the candle body gives an idea of how much activity the stock observed during the trading day. The different combinations that the candles can show give the investor crucial information. This is what makes candlestick charting the preferred technical analysis tool.