1.2 Anatomy of a Candlestick

Understanding the anatomy of a candlestick is essential for interpreting price action accurately. Each candlestick tells a story about the battle between buyers and sellers during a specific time period.

Open, High, Low, Close (OHLC)

Before delving into the individual components, let's clarify the terms Open, High, Low, and Close:

• Open: The price at which the asset started trading during the given time period.

• High: The highest price reached by the asset during the time period.

• Low: The lowest price reached by the asset during the time period.

• Close: The price at which the asset concluded trading during the time period.

Components of a Candlestick

A candlestick consists of three main parts: the body, the upper wick, and the lower wick. These components visually represent the price movement within a specific time frame.

• Body: The body of a candlestick represents the price range between the opening and closing prices during the chosen time period.

• Wicks: The wicks, also known as shadows, extend above and below the body of the candlestick. They represent the range between the highest and lowest traded prices during the time period. They can be broken down into two types. Upper wicks and lower wicks.

• Upper Wick: Upper wicks extends from the top of the body to the high price of the period. It reflects the highest price the asset reached during the chosen time frame.

• Lower Wick: Lower wick extends from the bottom of the body to the low price of the period. It represents the lowest price the asset reached during the chosen time frame.