What is a chart?
In trading, charts are used to view historical prices of an underlying asset over time. The X-axis (horizontal) represents time, and the Y-axis (vertical) represents the asset’s price at a given time.
Although there are different types of charts that one can use to represent this data, for the purposes of trading, the candlestick chart is most commonly used, as it provides more information than other types of charts (such as line chart, bar chart, etc.), which gives the trader additional insight.
Candlestick charts are so named because the vertical section that represents the range of prices for a given time period looks like a candle – with a wick at the top, bottom, both top and bottom, and in some cases, with no wick at all.
The body of a candle is typically coloured green if the price increased during that candle’s time period, or red if the price decreased.
For a green candle, the top of the candle’s body represents the price at the start of that time period (referred to as the opening price), and the bottom of the candle’s body represents the price when that time period ended (known as the closing price).
Conversely, for a red candle, the top of the candle’s body indicates the opening price for the time period, and the bottom of the red candle’s body represents the closing price for that time period.
For both red and green candles, the wick at the top (if present) represents the highest price during the time period, and the wick at the bottom shows the lowest price during that period.