What you will learn
- Read open, high, low and close from a candlestick.
- Classify a trend with a written rule and treat levels as zones.
Anatomy of a price bar
Each bar summarizes one period with four prices: open, high, low and close. A candlestick draws a body from open to close and thin wicks out to the high and low, so a long wick shows price traveled and then retreated.
Color conventions differ by market: some charts draw rising bars in green, others in red. A one-minute bar and a daily bar mean different things, so always note the timeframe.
Defining a trend with rules
A common rule calls higher highs and higher lows an uptrend, lower highs and lower lows a downtrend, and anything else a range. The rule needs a stated swing size, otherwise two analysts will mark different turning points.
Trends depend on timeframe, so a daily uptrend can sit inside a weekly downtrend. Writing the rule before looking at the chart prevents redefining the trend to fit what already happened.
Support and resistance as zones
Support and resistance are price areas where earlier turning points clustered. Treat them as zones with some width, since price rarely reverses at exactly the same number twice, and higher volatility calls for wider zones.
Repeated tests do not guarantee a level will hold, and broken levels sometimes act in the opposite role afterward and sometimes do not. These are tendencies to examine, not rules.
Worked example: Reading three illustrative bars
Day 1 of a fictional stock opens at 100.0, reaches 104.0, falls to 99.0 and closes at 103.0: body 3.0, range 5.0, wicks 1.0 each. Day 2 trades 102.0 to 108.0 and Day 3 trades 103.0 to 109.0. Highs 104, 108, 109 and lows 99, 102, 103 are all rising, so the rule labels an uptrend; a Day 4 low of 102.5 would break it.
Check your understanding
A bar opens at 52.0, reaches a high of 55.0 and a low of 51.0, and closes at 54.0. Find the body, range and both wicks. Did price close above its open?
Show answer and explanation
The body is 54.0 - 52.0 = 2.0 and the close is above the open. The range is 55.0 - 51.0 = 4.0, the upper wick is 55.0 - 54.0 = 1.0 and the lower wick is 52.0 - 51.0 = 1.0. Check: 2.0 + 1.0 + 1.0 = 4.0.