By Traders and investors have been using candlestick charts for many years now. The first time they started using candlesticks to track the price of an asset goes back to the rice market in Japan. They were first made to track the increase and decrease in the price of rice. By doing so and analyzing the changes in the price of rice for the past few days and weeks, they were able to forecast the price of the rice for tomorrow and future weeks. By reading this article, you will learn about a specific part of a candle’s anatomy, its wick. This article will teach you what candle wicks are and how to read them.
Candle Wicks
Since then candlesticks have been a very useful tool for investors and traders. So if you’re a trader or an investor you should definitely learn how to read candlesticks. Whether you work in the crypto market, the New York stock market or Forex.
What are candle wicks made of?
Before explaining what candle wicks are made of and how a candle wick is made, this article will teach beginners about candlesticks anatomy.
What are candle wicks?
A candle wick is a line attached to the top or the bottom of a candle in a candlestick chart. Traders and investors know candle wick is also the candle’s shadow. By looking at candle wicks traders can gain a lot of information.
To have a better understanding of candle wicks you should know more about candlesticks anatomy, for example, you should know what a candle’s opening and closing prices are. A candle consists of 4 inputs which differ from candle to candle, opening, closing, highest and lowest prices.
In candlestick charts, the difference between the opening and closing price is the candle’s body.
The shadow or candle wicks are the lines sticking out of the candle’s full body. The upper wick shows us what was the highest price the candle could reach, and the lower wick shows us what was the lowest price the candle could reach before closing at the close price. So, to put it simply, the wicks on a candle show us what was the highest and lowest price a certain asset could reach during the duration of that candle.
Now that you know what parts of a candle are called candle wicks, we can move on to find out and analyse how candle wicks are made.
How candle wicks are made?
This section covers how traders make candle wicks. Candle wicks or candle shadows are located at the top or the bottom of a candlestick. By knowing how market sentiment makes shadows, you are more likely to understand them. Then you’ll read them more easily and extract the information they are dying to give you.
The candle wick shows us the highest and the lowest price the candle could reach during its period. For example in a candlestick chart of an asset, a candle opens at 100$, during the day it reaches $120, but before the market closes the price sellers reject that level and the candle closes at 80$. Now, this would be a red candle with an upper shadow which is the size of the candle’s full body.
How to read candle wicks?
Take a look at this image which shows a Bitcoin candlestick 1 Day chart. If you aren’t familiar with the term, 1 Day means each one of the candlesticks shows the change of price in Bitcoin during the period of a day.
Take a look at the candlesticks located in the black circle. During the two candle wicks in the black circle, Bitcoin has tried to surpass 45,000. But sellers rejected it both times, so the price dropped in the next 2 weeks. Now take a look at the candle wicks located in the area marked by the big red circle. There the price tried once again to break out of 45,000 but wasn’t able to reach as much as it did the time before, so it dropped again.
Now let’s take a look at those candles in more detail. At both of those times, the black circle and the red circle, Bitcoin (BTC) tried to break out of 45,000. The candles opened at a price lower than 45,000. During the day buyers increased the price, so it surpassed 45,000, then the bears (sellers) decided that it was a good time to sell. That caused the price to drop.
The candle wicks are actually made when traders decide that this price is what it is. If they decide the price should be lower than what it is, the candle will have an upper shadow, and if the traders decide the price should be higher than what it is, the candle will have a lower shadow.
Conclusion
Knowing candlestick anatomy plays a major role in your ability to analyse the market. Candle wicks or candle shadows are the lines at the top or the bottom of a candle which show the price’s extremes. To put it simply, it shows the highest and the lowest price reached during that candle.
FAQ
What is the wick of a candle in stocks?
Wick or Shadow is the line coming out of the top or the bottom of a candle’s body. It shows the highest and lowest price reached during the period of that candle.
What do long wicks mean in trading?
Long wicks or long shadows show that the market isn’t ready to move in a certain way. If the long shadow is an upper shadow it means the market isn’t ready to go up and vice versa.
What does a candle with no wicks mean?
A candle with no wicks or no shadows is a strong signal. It shows the certainty of the market to move in a certain direction. If it’s a big green candle with no wicks it’s a strong bullish sign and vice versa.
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Candle Wicks or Candle Shadows, are lines that come out of the top or the bottom of a candle. which shows the highest and lowest price that asset could reach…
