Every price chart is a visual record of human psychology — greed and fear playing out in real time. Candlestick charts, developed by Japanese rice traders in the 18th century, pack more information into each time period than any other chart type. Learning to read them is the starting point for everything in technical analysis.
Each candle represents one time period — 1 minute, 1 hour, 1 day, 1 week. It shows four prices: Open, High, Low, Close (OHLC). The body is the range between open and close. The wicks (shadows) extend to the high and low of the period.
Price alone tells you what happened. Volume tells you whether to believe it. A price move on high volume has conviction behind it — many participants committed capital to that direction. A move on low volume is tentative — thin participation, easily reversed.
The key rules: rising price + rising volume = healthy trend. Rising price + declining volume = weakening trend, watch for reversal. Falling price + high volume = distribution (selling pressure) — often signals more downside. Falling price + low volume = weak selling, may be near a bottom.
The most reliable candlestick signal: the bullish engulfing pattern after a downtrend. A large green candle that completely engulfs the prior red candle, on above-average volume, at a recognisable support level — that combination is one of the strongest reversal signals in technical analysis. No pattern is foolproof, but confluence of signals improves probability meaningfully.
Answer questions on candlesticks & volume, earn XP, and challenge your mates to a stock duel.
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