Candlestick charts have been used in Western trading for many years and are a very popular method of plotting the price action of a given security over time. A typical candlestick chart is composed of a series of bars, known as candles, which vary in height and color. As you can see from the figure below, the color of each candle depends on the price action of the security for the given day. An unfilled candle, shown on the left, is created when the opening price is lower than the security's closing price. Remember that each bar can represent a minute, day, week, or even month, but the chosen time frame does not influence the color of the candle because a hollow bar will always be created when the close is higher than the open. This type of candle shows that buyers were in control of the security because the price was able to rise over the period, but this does not provide enough information to predict what will happen next.


A filled bar, usually red, is created when a security's closing price is below the price at which it opened. This bar shows that the asset traded downward for the period and that the bears are in control. Any color can be chosen to create any candlestick, but regardless of the color used to outline an unfilled bar, it is always used to represent a period where the price rose. In the figure above, we chose blue. Conversely, the color of the filled bar is used to illustrate periods where the price declined.

For more on this technique, see The Art of Candlestick Charting.

  1. What are the differences between a bar chart and candle sticks?

    Explore the difference between bar and candlestick charts. Learn how technical analysts use charts in the analysis of supply ... Read Answer >>
  2. How do I Implement a forex strategy when spotting a Morning Star pattern?

    Learn how to design a forex trading strategy to use for trading the morning star candlestick pattern, an indicator of a bullish ... Read Answer >>
  3. How do I build a profitable strategy when spotting a Morning Star pattern?

    Create a profitable trading strategy to use when spotting a morning star candlestick pattern that indicates a bullish market ... Read Answer >>
  4. What do you call a candlestick with no shadows, and what does it mean?

    A candlestick with no shadow is regarded as a strong signal of conviction by either buyers or sellers depending on whether ... Read Answer >>
  5. Are continuation patterns most useful when looking at Candlesticks?

    Learn the basics of using candlesticks to confirm continuation or reversal patterns and the vital role this plays in establishing ... Read Answer >>
  6. How do I build a profitable strategy when spotting a Rising Three Methods pattern?

    Read about how to identify and then build a trading strategy around a rising three methods pattern on a Japanese candlestick ... Read Answer >>
Related Articles
  1. Trading

    Candlestick Charting: What Is It?

    Discover the components and basic patterns of this ancient technical analysis technique.
  2. Trading

    Range Bar Charts: A Different View Of The Markets

    While range bars are not a type of technical indicator, traders can employ this useful tool to identify trends and interpret volatility.
  3. Trading

    The 5 Most Powerful Candlestick Patterns

    Statistics show unusual accuracy for the buy and sell signals of certain candlestick patterns like abandoned baby, evening star, and three black crows.
  4. Investing

    Tips For Creating Profitable Stock Charts

    Find out how to create well-designed charts that will enhance your market analysis.
  5. Small Business

    Economics of Owning a Bar

    Understand what costs go into starting and running a bar, as well as what earnings can be expected. Learn whether or not it is smart to own a bar.
  6. Trading

    Using Bullish Candlestick Patterns To Buy Stocks

    These five popular candlestick chart patterns signal a bullish reversal in downtrend.
  7. Trading

    Heikin-Ashi: A Better Candlestick

    Enhance trend isolation and prediction of future prices with this technique.
  8. Trading

    Advantages Of Data-Based Intraday Charts

    We take a look at these chart intervals and how we can use them to our advantage.
  9. Trading

    What Your Trading Charts Aren't Telling You

    You may be missing some key statistics when following charts in the market.
  10. Trading

    Gauging Entry And Exit Signals With Range Bars

    Wide range price bars often generate important signals that traders can use for timely entry or exit.
  1. Bar Chart

    A style of chart used by some technical analysts, on which, as ...
  2. Red Candlestick

    The component of a candlestick chart that represents a downward ...
  3. Bar

    A graphical representation of a stock's movement that usually ...
  4. Evening Star

    A bearish candlestick pattern consisting of three candles that ...
  5. Morning Star

    A bullish candlestick pattern that consists of three candles ...
  6. Upside Tasuki Gap

    A candlestick formation that is commonly used to signal the continuation ...
Hot Definitions
  1. Wealth Management

    A high-level professional service that combines financial/investment advice, accounting/tax services, retirement planning ...
  2. Assets Under Management - AUM

    The market value of assets that an investment company manages on behalf of investors. Assets under management (AUM) is looked ...
  3. Subprime Auto Loan

    A type of auto loan approved for people with substandard credit scores or limited credit histories. There is no official ...
  4. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  5. Federal Debt

    The total amount of money that the United States federal government owes to creditors. The government's creditors include ...
  6. Passive Management

    A style of management associated with mutual and exchange-traded funds (ETF) where a fund's portfolio mirrors a market index. ...
Trading Center