Keeping track of the stock market is a great thing to do for your portfolio. Another gift you can give to yourself and your stock portfolio is to be well versed in the basics of reading stock charts.
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Candlesticks are usually composed of the body (black or white), and an upper and a lower shadow (wick). The wick illustrates the highest and lowest traded prices of a security during the time interval represented. The body illustrates the opening and closing trades. If the security closed higher than it opened, the body is white or unfilled, with the opening price at the bottom of the body and the closing price at the top. If the security closed lower than it opened, the body is black, with the opening price at the top and the closing price at the bottom. A candlestick need not have either a body or a wick.
- Bearish Candlesticks
- Bullish Candlesticks
These are usually used to help stock traders smooth out a stock chart, or to quick see when a stock might be going lower or higher than usual.
Chart Technicals are commonly used by stock trader to forecast the future movement of a stock. They make no guarantees of futures price patterns. However, they do help investors anticipate what is likely to occur. Many technicals, for example, show when a stock seems to have become oversold or overbought, allowing an investor to help plan their trades.
Another way to help predict price patterns in a stock is to use specific chart patterns. Certain pattern types can help an investor recognize an upcoming bullish move or caution them of a possible upcoming bearish pullback.