How to Form a Candlestick in Charts
Candlestick charts are one of the most popular tools used in technical analysis. Each candle tells a story about the price movement of a stock during a specific time period (minute, hour, day, week, etc.).
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Key Elements of a Candlestick
Each candlestick consists of 4 important prices:
- Open: Price when the time period starts
- High: Highest price reached during the time period
- Low: Lowest price reached during the time period
- Close: Price when the time period ends
Bullish Candlestick (Green)
A bullish candlestick forms when the closing price is higher than the opening price. This indicates buyers were in control during the session.
- Bottom of the body: Opening price
- Top of the body: Closing price
- Upper wick: High point
- Lower wick: Low point
Bullish Candle (Price Increasing)
If the closing price is higher than the opening price, the candle is green (bullish).
- Open: ₹190
- High: ₹230
- Low: ₹170
- Close: ₹210
Bearish Candlestick (Red)
A bearish candlestick forms when the closing price is lower than the opening price. This indicates sellers dominated the session.
- Top of the body: Opening price
- Bottom of the body: Closing price
- Upper wick: High point
- Lower wick: Low point
Bearish Candle (Price Decreasing)
If the closing price is lower than the opening price, the candle is red (bearish).
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- Open: ₹190
- High: ₹200
- Low: ₹160
- Close: ₹165
Summary: Candlestick Formation
The shape of a candlestick gives important insights:
- Long body: Strong buying or selling pressure
- Short body: Market indecision
- Long wick: Rejection of higher/lower prices
Candlestick Summary
- Wick (Shadow): Shows the range between High and Low
- Body: Area between Open and Close
- Color: Green means price went up, Red means price went down
Why Candlesticks Matter?
Reading candlesticks helps you understand market psychology and predict trends. It’s the foundation for recognizing patterns like Doji, Hammer, Engulfing, etc.
Tip: Refer to the image below to understand the structure of bullish and bearish candles visually.
Visual Example with Prices:
This image shows how a candlestick is formed with real price values for better understanding.
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