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Questions & Answers
What is a Green Candlestick?
A Green Candlestick is an illustrative way of reflecting positive Price Action over a given time period.
The horizontal bars of a Green Candlestick represent the opening and closing prices and the box between these two levels is referred to as the ‘body’ or ‘real body’. A Green Candlestick body reflects that over that time period the closing price was above the opening price. The vertical lines represent the range of price action during the period. The highest point of the upper shadow reflects that period’s trading high and the lowest part of the lower shadow reflects the low of the time period. Short shadows denote a price action to have been within a small range, longer shadows denote a greater price range. [It’s worth noting that color choice is arbitrary, and some follow the practice of coloring the bodies of positive candles white instead of green.]
Candlestick charts are simple in design and present a way to clearly and quickly convey price action. It is also possible to grade the strength of the signal.
The Candlestick on the far-right hand side is the most ‘Bullish’. It has a long lower shadow that suggests at some part of the trading period bearish traders sold heavily and drove prices down. By the end of the time period strong buying pressure had taken price back above the opening price and continued to make new highs. The closing price being close to the high point of the period suggesting buyers finished the session on top.
Candlesticks are a method of understanding prices action and their use can be extended over all markets and tradeable instruments. Trading strategies based on Technical Analysis take things one step further and might use Green Candlesticks as guides to enter into long positions and, or close out short positions. It should be noted that trading solely off Candlesticks while possibly profitable would not be taking account of other market information that is readily available. Many other signals, such as traded volumes, Pivots and Support and Resistance levels can be incorporated into your strategy to act in conjunction with the candlestick analysis. Moreover, the information is widely available free of charge including from Broker Platforms.
Different time periods can be selected. Those typically available range from 1m (one minute) through to 1y (one year) but the design characteristics of the candlestick are constant regardless of the time period or instrument to which they are applied. A Green Candlestick formed by data taken over a longer time period is considered to offer a more reliable signal. This is on the basis that more market participants have been involved in generating the buying pressure to make prices rise.