Ask Colin

Could you please tell me how a candle is drawn in a candlestick chart?

Could you please tell me how to read 'candles' not necessarily interpret them, just to understand how they have been produced. Ie solid candle, hollow candle, exposed stick etc. I guess they are linked with opening and closing prices but have no information about them.

Candles consist of a "real body" of the candle (the thick part) and the "shadows", which can be both above and below the real body, like a wick. Hence the name "candle".

The real body is drawn between the open and close prices. The shadows are extended out to the high at the top and the low at the bottom, if those prices are outside the high/low range.

The black or solid candles are where the close was below the open. The empty or red candles are where the close was above the open.

A good book to start with is Louise Bedford The Secrets of Candlestick Charting, published by Wrightbooks in Australia.

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