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The 5 Basics of Candlestick Charts

Learning how to interpret candlestick charts may help you gauge the expectations surrounding a stock and where it may be headed.

Visualize Price Activity
Visualize price activity

Visualize price activity and determine entry and exit points with candlestick charts. View the opening and closing of a period.

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Assess the real body

The candlestick’s rectangular real body represents the relationship between opening and close for a period. The larger the body, the greater the gap between prices.

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Understanding shadows

Shadows, also known as wicks, are the lines above and below the candlestick body. The upper line represents the highest trade of a period, while the lower shadow represents the lowest trade

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Colors provide insight

A red body indicates the stock closed at lower prices than the opening, while a green body indicates the stock closed at a higher price than the opening. A small body may indicate bulls or bears are fighting for control. A large body may represent a lot of activity.

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Time intervals

Charting security activity across different timeframes provides you a holistic view of trends. Depending on your strategy, choose a short-term interval (one minute to one hour), long-term interval (daily or weekly charts) or both.

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Past performance is no guarantee of future results.

Investing involves risk, including loss of principal. Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market. 

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. Examples are not intended to be reflective of results you can expect to achieve. 

All expressions of opinion are subject to change without notice in reaction to shifting market conditions.

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