UK Accounting Glossary
A candlestick is a basic unit in a candlestick chart that visually represents the movement of prices during a specified period of time — typically one trading day. The concept of candlestick charts was developed by Japanese rice traders in the 17th century. In its basic form, a candlestick consists of a rectangular box or “body” with a thin line or “shadow” sticking out either end. The shadows of a candlestick may also be referred to as “wicks” or “tails.” The shape and colour of a candlestick, and the length of its shadow or shadows, are the elements that reveal price movement. A candle with an open or white body represents a day when the price of a stock or security closed higher than it opened. The bottom edge of a white candlestick is the day’s opening price, and the top edge is the closing price. A candle with a filled in or black body (or in some cases, red), represents a day when a stock’s price closed lower than it opened. The top of a black candlestick is the day’s open and the bottom is the day’s close. In either instance, the length of the candlestick body reveals the strength of buying or selling sentiment. Candlestick shadows represent the trading range of the security/asset that occurred anytime after the open and prior to the close with the top shadow representing the session’s high price and the bottom shadow representing the sessions low price.
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This glossary post was last updated: 4th February 2020.