Candlestick Charting For Dummies, 2nd Edition

Chapter 3

Building a Base of Candlestick Chart Knowledge

IN THIS CHAPTER

Understanding the basic components of candlestick charts

Working with additional information on candlestick charts

To take full advantage of candlestick charts, you must understand how they’re constructed. From the basic pieces of information used to generate a candlestick to the various additions and extra pieces of data that can be tacked onto a chart, you need to know just what you’re looking at before you can make wise trading decisions. You need to be familiar with candlestick nuts and bolts before delving into their interpretations and uses.

In this chapter, I offer a solid foundation of candlestick know-how. I start with the data that goes into constructing individual candlesticks. Although candlesticks can represent the action of a security over a wide variety of time periods, the basic information used to build them is the same. I also cover the other pieces of data that are commonly included in a candlestick chart — added features that enhance the usefulness and readability of the chart.

Constructing a Candlestick: A Core of Four

For any security, each day of trading includes four key components in terms of data: opening price, closing price, highest price traded on the day, and lowest price traded ...