One of the main tools used by technical analysts is historical charts. Among these one of the most popular forms of charts that technical analysts use is called the candlestick chart. 

As can be seen below, there are two main types of candlesticks.  A gaining candlestick is a stick in which the closing price is higher than the opening price.  In the image below, this is represented by a green stick.  A decreasing candlestick is a stick in which the closing price is lower than the opening price.  In the image, this represented by a red candlestick.  Different charting packages employ different color schemes.  Some even allow you to customize your color selections.

The main elements of a candle stick are the open price, high of the day, closing price and low of the day.  The open price is indicated by the bottom of the body for a gaining candlestick(the body is the wide rectangular section) and the top of the body for a decreasing candlestick.  The closing price is indicated by the top of the body for a gaining candlestick and the bottom of the body for a decreasing candlestick.  The high of the day is indicated by the top of the line that extends from the top of the candlestick body.  The low of the day is indicated by the bottom of the line that extends from the bottom of the candlestick body.  See illustration below.

Candlestick charting is a very popular charting method amongst technical analyst.  However this is just the tip of the iceberg when it comes to tools that can be used for analyzing stock price/volume patterns.  Stay tuned to SMG for more instructional articles on technical analysis.

SMG Staff