In trading charting in general is often used to help investors assess the viability of an investment by tracking its progress and trends over time. Candlestick charts are a form of charting that gives a little more analysis than a standard chart. This kind of charting is thought to have first originated in Japan.
Candlestick charts are probably given their name because of the candle-like symbol that is used to depict the behaviour of an investment for a set period. This is kind of like a bar chart representation but contains more information in each candle bar and it is a little more complex to read and understand.
The symbol used to show a trading period on candlestick charts will have a bar shaped body with a line coming out of each end (often referred to as the candle wicks or the shadows). The position of each bar on the overall chart may, as with standard bar charts, be used to gather information.
So, for example, this could show the movement of the investment in the specific period, including data such as its opening price, closing price, highest price and lowest price. But there is more to candlestick charts than this kind of basic information which can also often be gained from other more basic charting methods.
The body of the bar on candlestick charts is also used as a source of information. The colour of the actual bar body also tells the investor valuable information. So, for example, if it is coloured green or white then the investor can tell at a glance that it had a higher closing price. If it is coloured red or black then they can see that it had a lower closing price.
In candlestick charts the wick or shadow element at each end of the bar are also information sources. A short shadow at the top, for example, shows the investor that the high price of the day for the investment was close to its opening price. Learning all the ins and outs of the symbols involved in this kind of trading can take a lot of work.
Candlestick charts are often considered to give more information to traders than standard charting solutions. But, they can be more complex to pick up and learn. They often give a slightly different view of trading prices and trends than standard charts as they are designed to focus on a different kind of information.