There are many kinds of charts that traders can use to monitor the stock market, but the most popular is probably the candlestick chart. A candlestick is like a bar chart with the only difference that candlesticks use colours and patterns more aggressively and intelligently to give a quick image of the pattern of the stock.

A candlestick chart shows four key prices for the day—the opening price, closing price, highest price, and lowest price. These are based on that day’s completed transactions.

If the candle is green (you can set colours according to your choice), it means that the closing price was higher than the opening price. If it is red, it means the opening price was higher than the closing price. Ideally, the trend is more favourable to long trades if the closing price is higher than the opening price for the stock or the index.

The colours of the candlestick charts might change depending on the chart you’re using, but one colour will always show an increase in price over the day and another colour will show a decrease in price. Normally, green is used to depict an increase in price while red is used to denote a fall in price during the day. Typically, these colours are also intuitively more appealing. Remember, when it comes to candlesticks, getting these basics right is very critical. That is because, technicals is after all a case of extrapolating past trends into the future. If you get your understanding of the past trend wrong, then your future extrapolation is also going to be wrong. Once you understand how to read charts, then you can also start seeing patterns forming more easily. Candlesticks are the key to understanding the trend shifts in a stock.