Anatomy of a Candlestick
Each candlestick represents one time period (a day, hour, week, etc.) and contains four data points: the open price, close price, high price, and low price.
The rectangular body shows the range between open and close. If the close is above the open, the candle is typically colored green (bullish). If the close is below the open, it is colored red (bearish). The thin lines extending above and below the body are called wicks or shadows, representing the high and low reached during the period.
Common Patterns
Doji: A candle where the open and close are nearly identical, forming a cross shape. It signals indecision and potential trend reversal.
Hammer: A small body at the top of the candle with a long lower wick. After a downtrend, it suggests selling pressure was absorbed and buyers are stepping in.
Engulfing: A two-candle pattern where the second candle's body completely engulfs the first. A bullish engulfing after a downtrend or bearish engulfing after an uptrend can signal reversal.
These patterns are descriptive, not predictive. They describe what happened; they do not guarantee what will happen next.
Volume Confirmation
Candlestick patterns are more significant when accompanied by above-average trading volume. A reversal pattern on thin volume is less reliable than one occurring with a surge in participation.
Most charting platforms display volume bars beneath the candlestick chart. On the Apter stock detail page, volume is shown alongside the candlestick chart for each time period.
Timeframes and Context
The same stock can show a bullish pattern on a daily chart and a bearish pattern on a weekly chart. Longer timeframes generally carry more significance because they represent broader consensus.
Professional analysts typically examine multiple timeframes simultaneously: the weekly chart for overall trend direction, the daily chart for intermediate moves, and shorter intervals for entry timing.