Candlesticks Price Chart Explained

30 Apr
Candlesticks charting MT4

Candlesticks Price Chart Explained

As a BlackStone Futures member, you know you have access to the most powerful trading platform out there. MetaTrader 4. As a new trader, it can be quite an eye opener to open the trading platform to find a whole lot of numbers, colours and charts such as candlesticks. But I don’t want you to worry. I’m going to make your life as easy as possible with the trading platform and how to enter and exit your trades. Today I’ll explain to you what the chart type is, how it works and how you can set it up on your MetaTrader 4 platform.
Let’s get to it…

The one price chart you’ll need as a trader

The price chart type is called “Candlesticks” when you open your MetaTrader 4 platform you can find it on the top tool bar. It should look like this.

Chart type toolbar MT4

Click on the middle chart type which will convert your charts to candlesticks. The reason is simple. Each candlestick reveals a whole lot of information on a chart compared to a line chart. A line chart is probably the chart type you see mostly on Bloomberg, CNBC and in newspapers. The only problem with a line chart is that it will only show you the closing price at any one point. With candlesticks, you can see the entire trading activity (buying and selling levels) that took place during a certain time.

To explain this in more detail, let’s break down the three main types of candlesticks out there using components.

Candlesticks #1: The Up Candle (Bullish)

Bull candle

A candlestick is broken down into three components.

Component #1: The body

The body is what gives the candle it’s thickness. The body is formed between the open and closing price of the candlestick.

Let’s say you’re looking at the daily chart of let’s say Sasol.

Each candle will show you it’s open price at around 9:00 when the market opens and at 5:00pm you’ll see the closing price where the candle closes for the day.

As we’re looking at an up candle, you’ll note that the open price is lower than it’s closing price.

This means that the bulls won (as the market is trading higher at the close than at the open).

Component #2: The wick

Just like a candlestick has a wick, with the candlestick chart type you may also see a wick on the chart.

Basically, the wick of the candle will show you all of the prices traded between the closing price and the High price of the candle stick. And the open price and the low price of the candle.

It’s the long thin line which shows prices traded that doesn’t include the body of the candle.

Component #3: The colour

How do we know where the open and closing price is on a candlestick chart? We use the colour of the candle. As we know the up candle is a bullish candle, the colour of the candlestick I chose is Green.

Note: With MetaTrader 4 – You’ll be able to change the colour of your candlesticks to your preference.

So to sum up the Up Candle

Component #1: The body

The close price is higher than the open price

Component #2: The wick

The prices with the wick are between the open & the low price and the closing price & the high price of the candlestick

Component #3: The colour

The colour of the candlestick is green showing us it’s an up candle.

Now that you understand the mechanics of a green candle the next two candles will be an absolute breeze for you. Moving on to the next candle.

Candlesticks #2: The Down Candle (Bearish)

Bear candle

The down candle is simply the opposite to the up candle. This is a candle where the bears (sellers) won. Where the sellers were able to bring down the price of the market from where the candlestick opened.

Here are the three components of a Down Candle.

Component #1: The body

The closing price is below the open price.

Component #2: The wick

The prices with the wick are between the open & the high price and the closing price & the low price of the candlestick

Component #3: The colour

The colour of the candlestick, which I chose, is red which shows us it’s a down candle.

Candlesticks #3: The Doji Candle (Indecision)

Doji candle

The Doji candle is where neither the bulls (buyers) and bears (sellers) won. To put it bluntly, where the open price of the candlestick was, is exactly where the closing price is on that candle. And so this candle looks like a flat cross, with no body. You might be wondering why there would ever be Doji candles. Think of the Doji candles as the undecided candles between the buyers and sellers. At the end, nobody wins where it’s a draw between the bulls and the bears. These are the candles to watch out for as they could be major turning points for the next trend.

“Wisdom yields Wealth”

Timon Rossolimos
Analyst, BlackStone Futures

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