LESSON 1 : Introduction To Trading
------------------------- Part 1 of 4 - Candlesticks -------------------------
Here we look at the basics of how candles work - this will be the foundation of how we look at charts throughout the course.
Each candle shows us some vital information about how the price has moved, which in turn will eventually allow us to make our predictions of what will happen next.
Now there are different ways you can look at a chart – you can use bars, or lines, or a bunch of other stuff - but for us we’re going to use something called candlesticks…
So despite the funny name – a candle is going to be the visual representation - to show us what the price has done over a day.
And to be specific – each candle is going to show us 4 main price points. The opening price at the very beginning of the day – the closing price at the very end of the day – and then the highest and the lowest prices it got to during the day.
So let’s look at an example of how this works…
Here you can see that the price is scaled along the side from top to bottom. So the price get’s higher - the higher you go up the scale.
And the candles are going to be plotted on this chart – depending on what the price does.
So let’s say as an example – for this day the opening price is 115 – and that’s the very first price at the beginning of the day. And then at the end of the day - let’s say it finishes up at 130 – so that’s the closing price.
So now we have these 2 small lines to represent the open and the close. And what a candle will do - is essentially turn this into a rectangle – and we call this part the body of the candle.
And because here the price closed higher than where it first started – in general this means that the price went up - So for this reason the candle body would be green. So the body that we see here – shows us the difference between the open and closing prices…
Now during the day – in between the open and the close – the price is going to make a high and a low.
In this example let’s say the highest it got to was 135. And the lowest was 110.
So as you can see – the high and low prices are shown by this vertical stick in the middle – which we can also call the wick.
So taking a step back – this is what a candle is going to look like – and we can see all of those major price points for this particular trading day…
Now on the next day – we’re going to move on to a fresh new candle – obviously because it’s a new day.
So now let’s say we have an open of 135 - And a close of 120. So again we have that candle body.
In between the open and the close – let’s say the price made a high of 140 – and a low of 115. So this gives us the wicks as well.
Now with this new candle – you can see the closing price is now lower than the opening price. So this actually means that - over this day - in general the price went down. And for this reason – this time the body will be red.
So when it comes to the bodies – just remember that green means the price went up – and red means it went down.
So now we know what candles are – in the next video let’s put them together to see how a chart works…