Each day on a candlestick chart is represented by a symbol resembling a small candle (hence the name): a vertical rectangle that can be black or white with a small vertical line sticking out of the top, the “shadow” (or “wick” to persist with the candlestick metaphor). Unlike real candles, there is another vertical line or wick sticking out of the base as well! The vertical axis on a candlestick chart represents share price, so the tops and bottoms of the rectangle and wicks represent price values.

The four elements represented on a Candlestick Chart

The stock starts each day at a particular price, called the opening value, and ends each day at a (possibly) different value, the closing value. During the day it may reach a peak price above the opening value or drop to a minimum price below the closing value, the high and low values respectively. These are the four elements represented by each candlestick on a candlestick chart.

What are Candlestick Charts?

Candlestick charts are a graphical way of expressing the movement of share prices from day to day. Each entry in the chart represents a single day but encodes information about the behaviour of the price on that day. They are sometimes known as Japanese Candlestick Charts because they are supposed to have been developed in Japan during the nineteenth century as a way of tracking rice prices.