In this video, we're going to show you everything you need to know about reading candlestick charts fast. Here's exactly what we'll be covering in this video. As always, if you want more videos more often, please hit the like button, as it allows for our team to keep producing videos on YouTube. Now, here's how you actually read a candlestick. Green candlesticks are bullish because price appreciated and went upwards for the time period.
Red candlesticks are bearish because price depreciated and went downwards for the time period. This rectangle area is known as the candlestick body or the real body. These lines that stick out above and below the candlestick body are known as the wicks or shadows or tails.
For green candlesticks, the opening price is at the bottom of the candlestick body, and then the close price is at the top of the candlestick body. For red candlesticks, the opening price is at the top of the candlestick body, and the closing price is at the bottom of the candlestick body. The wick ends at the top represent the highest price point of the time period. The wick ends at the bottom represent the lowest price point for the time period.
Now what does the size of the candlestick body tell you? The bigger the candlestick body represents momentum gain as price traveled a greater distance during that time period. The smaller the candlestick body represents momentum loss as price traveled a shorter distance during that time period. When you have a very small candlestick body or close to no body, this is known as a doji, which represents indecision from buyers and sellers because price swung up and swung down during that time, but then closed close to the same price as where it opened from, which means buyers and sellers got nowhere and again shows indecision. Now, before we show this on the charts, why are candlesticks important to understand?
Candlesticks tell a story and are a reflection of what buyers and sellers are doing. Meaning the candlestick pattern that forms at that particular moment in time tells you a lot about what is going on in terms of the buying and selling occurring in the market. So traders will look at candlestick patterns and the movement of candlesticks to make trading decisions, which is also known as price action.
Now let's go through this right on the charts. This here is the asset you are looking at. And in this case, it is the Apple stock. This here is your timeframe.
Right now it shows 1D, which translates to the daily time frame, meaning every candlestick you see represents one day of time. If we were to switch this to the weekly time frame, it would show 1W, and then every candlestick you see on screen would represent one week of time. If we were to switch this to the one hour time frame, it would show 1H, and then every candlestick on screen would represent one hour of time. This bar below tells you the date and time. So if you take your mouse and place it on top of this candle here, You'll see the dotted lines connecting the candle to the scale below, which shows the date as January 3rd.
If you move your mouse one candle to the right, you'll see one day later, which is January 4th. Again, because you are on the daily time frame, every candlestick represents one day of time. Now this bar to the right tells you the price of the asset.
Let's say you want to know the price of this green candle here. Remember, green candlesticks open below at the bottom of the rectangle here, and close above. above at the top of the rectangle here.
So if you want to know the opening price, place your mouse at the bottom of the rectangle and notice how the dotted lines connect the candle to the scale on the right. And it shows $126.05, which means when the market opened on January 6th, the Apple stock was trading at $126.05. Now, if you want to know the closing price, place your mouse at the top of the rectangle, look to the scale on the right and notice how it says $129.61.
which means when the market closed on January 6th, the Apple stock finished trading at $129.61. This is why green candles are bullish, because price opened at $126.05 and closed at $129.61, meaning the Apple stock appreciated $3.56 on the trading day of January 6th, which is bullish price action because buying interest in the stock drove price upwards. Now the wick below is the lowest price that the Apple stock reached that day.
Place your mouse at the bottom of the wick and it shows $124.90 as the day's lowest price. Now the wick above is the highest price that the Apple stock reached that day. Place your mouse at the top of the wick and it shows $130.30 as the day's highest price.
So let's say you want to know the price of this red candle here. Remember, red candle sticks open above at the top of the rectangle here and close below at the bottom of the rectangle here. For the opening price of January 3rd, place your mouse at the top of the rectangle and it shows $130.24.
For the closing price of January 3rd, place your mouse at the bottom of the rectangle and it shows $125.13. This is why red candlesticks are bearish because price opened at $130.24 and closed at $125.13, meaning the Apple stock depreciated by $5.11 on January 3rd. which is bearish price action. The wick below is the lowest price that the Apple stock reached that day. Place your mouse at the bottom of the wick and it shows $124.21 as the day's lowest price.
The wick above is the highest price that the Apple stock reached that day. Place your mouse at the top of the wick and it shows $130.93 as the day's highest price. So if you want to use the exact same charting platform we are using right now, go to tools.wisetrade.com. Now, when you see more red candles than green candles, this represents a downtrend in bearish price action and a depreciation of the asset, as sellers and bears continue to sell more of the asset, causing the push downwards. When you see more green candles than red candles, this represents an uptrend in bullish price action and an appreciation of the asset, as buyers and bulls continue to buy more of the asset, causing the push upwards.
When you see a bunch of green candles together, one after the other, this shows price is gaining more upwards momentum. When you see a bunch of red candles together, one after the other, this shows price is gaining more downwards momentum. When you see a mix of both red and green candles together and sideways price movement, this shows indecision, consolidation, and a choppy market.
So before we continue, we want to hear from you. Tell us in the comments below right now what topics we should cover next, as we always look at the comments to decide on next video topics. Also, please hit the like button as it allows 4-Hour Team to continue to produce free YouTube videos. So, how do you identify an uptrend?
You have your runs here and your pullbacks here, which means an uptrend makes higher highs and higher lows. From a price action standpoint. a moving uptrend shows bullish momentum and that the buyers are in control, so you lean towards taking long entries to trade with the moving upwards herd momentum. So now, how do you identify a trend change from an uptrend to a downtrend?
Type 1. You have your moving uptrend through the higher highs and higher lows, before a lower low forms, signaling a trend change from an uptrend to a downtrend. Type 2. You have your moving uptrend through the higher highs and higher lows. before you have a lower low form followed by a lower high pullback before the full trend change breakout and lower low type three you have your uptrend through the higher highs and higher lows before you have a lower high that forms signaling a trend change from an uptrend to a downtrend so how do you identify a downtrend you have your runs here and your pullbacks here which means a downtrend makes lower highs and lower lows.
From a price action standpoint, a moving downtrend shows bearish momentum and that the sellers are in control. So you lean towards taking short entries to trade with the moving downwards herd momentum. So now, how do you identify a trend change from a downtrend to an uptrend? Type one, you have your moving downtrend through the lower highs and lower lows before a higher high forms, signaling a trend change from a downtrend to an uptrend. Type two.
you have your moving downtrend through the lower highs and lower lows before you have a higher high form followed by a higher low pullback before the full trend change breakout and higher high. Type three, you have your moving downtrend through the lower highs and lower lows before you have a higher low that forms first followed by a trend change breakout and higher high. So how do you identify a sideways ranging market?
Prices making same highs you and same lows and moving in a sideways direction. In markets like this, look to take trades in both directions with confidence. So how do you identify momentum gain? The first way to identify momentum gain is to look for tight price movement. In an uptrend, notice how prices vary tight together without wide swings, which shows buyers are in full control and that not enough sellers are in the market to cause swings in the opposite direction.
You want to trade with this upwards gain of momentum and not against it. In the opposite direction, in a downtrend. Notice again how price is very tight together without wide swings, which shows that sellers are in full control and that there are not enough buyers in the market to cause swings in the opposite direction. You want to trade with this downwards gain of momentum and not against it. So the second way to identify momentum gain is candles growing in size.
In an uptrend, notice how each candle is getting larger and larger and moving a greater distance per candle, which shows a gain in bullish momentum. You want to trade with this gain of momentum and not against it. And in a downtrend, notice again how each candle is getting larger and larger and moving a greater distance per candle, which shows a gain in bearish momentum.
You want to trade with this gain of bearish momentum and not against it. So how do you identify momentum loss? The first way to identify momentum loss is to look for wide swings of price after tight price movement.
So this uptrend here is tight price movement. which means the buyers are in full control. You then had wide swings occurring, which shows momentum loss and that the buyers are no longer in complete control and can lead to a possible reversal of price if paired with trend change price action. Going in the opposite direction, this downtrend here is tight price movement, which means the sellers are in full control.
You then had wide swings occurring, which shows momentum loss and that the sellers are no longer in complete control and can lead to a possible reversal of price if paired with trend change price action. The second way to identify momentum loss is to look for shrinking candles. In a downtrend, notice how you start with a big red candle and then every candle after gets smaller and smaller, which shows a loss of downwards momentum as the distance traveled per candle is less and less. This can lead to a possible reversal of price. In an uptrend, notice how you start with a big green candle and then every candle after gets smaller and smaller, which shows a loss of upwards momentum.
as the distance traveled per candle is less and less. This can lead to a possible reversal of price. The third way to identify momentum loss is to look for a candle color change after you have consecutive candles of the same color. In the downtrend, notice how you have all red candles before a green candle appears. This shows momentum loss because price failed to produce another candle with a lower low closing price and instead made a higher closing price through the green candle.
This can lead to a possible reversal of price. In an uptrend, notice how you have all green candles before a red candle appears. This shows momentum loss because price failed to produce another candle with a higher high closing price and instead made a lower closing price through the red candle.
This can lead to a possible reversal of price. If you want to take your trading to the next level, head on over to our website at wisetrade.com as we have a ton of content on our site that won't ever be available on YouTube. Make sure to hit the like button on this video as it allows for our team to continue to produce more free videos on YouTube. Also, make sure to follow us on our Instagram account at Y Street.
So thanks for watching and I'll see you in the next episode.