BQLearning: How To Read Price Bars And Candlestick Charts
BQ Learning is a special show that seeks to demystify financial markets, economic theories, legal processes and political structures.
In this series, we explain how technical analysis works; how to identify trading opportunities through it and decode various concepts associated with it.
A price bar is the building block of technical analysis. It defines the trading action in a stock security for a given period. Analysis of price bars helps to identify a trend or range in which an underlying stock trades.
Every price bar has four components:
- Open: Price at which the underlying stock opens for trading.
- High: The intra-day peak price of the underlying stock.
- Low: The intra-day low price of the underlying stock.
- Close: The end-of-day price of the underlying stock.
Price bars help to make investment decisions. Buying can start in the security if it has a series of higher highs and higher closes. Higher highs and higher closes indicate demand for the security— buyers outnumber sellers.
Lower lows and lower closes mean sellers are overwhelming buyers.
Like the price bar, a candlestick bar also has four pivotal points. That’s beside the “real body”—the range between the open and close—and the “shadow wick”—that indicates the day’s high and low.
The colour of the “real body” shows how the struggle between buyers and sellers has played out during the day.
- A Green/White Bodied Candlestick
A green/white real body means the close is higher than the open. It indicates a bullish buyer market. The longer the body, more bullish it is. A long green/white candlestick indicates aggressive buying.
- A Red/Black Bodied Candlestick
A red real body means the close was lower than the open. It implies a bearish seller market. The longer the body, more bearish it is. A longer red bar also means that the close was near the day’s low, and there was a preponderance of sellers throughout the session.
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This is the fourth episode in the BQLearning Technical Analysis series. Watch the other episodes here:
Episode 1: BQLearning: Technical Analysis For Beginners
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