What Does Green And Red Candlestick Mean?
Candlestick charts are a very popular method to plot the price action of a security over time, and it has been used in Western trading for many years.
Meaning of Green and Red Candlestick in the Price Chart
A green candlestick shows that stock closed at higher on that day as compared to the previous day and A red candlestick indicates that stock closed at lower on that day compared to the previous day.
You can also see a black bar on the chart, and it is an indicator that stock closed at the same price as it was yesterday, or there is a possibility that the chart doesn’t have the closing value of the previous day.
You can see a series of bars in candlestick charts. These bars are known as candles and bars vary in height and color. Each candle color is an indicator of the price action of the security for the given day. The specialty of the chart is that each bar can represent a minute, day, week, or month, in short, whatever timeframe you choose, but the timeframe wouldn’t change the candle’s color.
Stock charts are very important to understand the historical price movement of a security. You can see lots of numbers on the table, but you can’t get meaningful information. However, up and down patterns in the charts convey meaningful information. You can analyze by having a quick look at the chart, and it can give you useful information about past performance. In this article, we will discuss, what does green and red candlestick mean? Charts have colors, and each color has some meaning.
What is a Red Candlestick?
When you are reading or viewing price charts, it is important to know what does green and red candlestick means? So, let’s discuss red candlestick first. A red candlestick is an indicator of the downward price movement. It shows the price at the close is lower than the open and previous close. Open and close on the candlestick are represented by the real body, and shadows represent high and low periods.
Why is it Important to Understand Red Candlesticks?
Charts are an integral part of technical analysis because you can get meaningful information at a glance. For example, red candlestick conveys the information that price moved lower during the period and also at the open, high, low, and close. More height of a candlestick means the greater price movement over that specific period. You can change the colors of a candlestick, but the commonly used colors are black filled, black hollow, red filled, and red hollow. Each color is designed to convey a different meaning.
It occurs when the stock price at close is greater than the prior close price, but it is lower than the opening price.
It occurs on the chart when the stock price at the close is greater than prior close and open.
Occur on the chart when stock prices of open and prior close are lower than the close.
Occur on the chart when the stock prices at the close are greater than the open but lower than the prior close.
The most commonly used candlesticks are black hollow and red filled. One is an indicator of a strong uptrend and the second is an indicator of a strong downtrend. Red hollow and black filled are not commonly used and they indicate an upcoming reversal instead of a continuation of an existing trend.
When a trader has all this information, it becomes easy for them to get some quick information by looking at the color candlestick color. Traders use these candlesticks with other technical analysis because it helps them to maximize their risk-adjusted returns.
Meanings of Green and Red in the Price Chart
In the price chart, Open-High-Low-Close (OHLC) and candlestick styles convey more meaning than a simple chart. Candlestick charts are different from simple charts, and these charts show four activities, such as open, high, low, and close, instead of a single point, i.e., closing price. Both red and green colors in candlestick charts are used to convey some extra meanings. You can also get the meaningful and same information in the monochrome version of these charts, but traders believe that red and green colors help them to interpret and understand the meanings quickly.
Red and green candlesticks are indicators of the up and down of stock prices. For example, a green candlestick on the chart indicates that the opening price was lower than the closing price that day. In other words, you can say the price moved up during the day. Similarly, a red candlestick is an indication that the opening price was higher than the closing price that day. You can say, the price moved down during the day.
What is the Difference between Price Chart and Volume Chart?
One thing is sure you will see both red and green colors in the volume chart and price chart for conveying the meaning. Now, the issue is meanings of these colors will be different in both carts. Sometimes the colors on OHLC will be different from the volume bar’s color. So, both these charts convey different meanings in the shape of color difference.
So, we started with what does green and red candlestick mean. I hope now you have got your answer. In trading, traders perform fundamental and technical analysis, and technical analysis includes reading and understanding of charts. So, it is important for traders to know the meanings of green and red candlesticks. These charts play a crucial role in determining future prices based on past results. You can get information about opening and closing stock prices from these candlesticks. Moreover, OHLC chart styles help you see open, high, low, and close stock prices of that day. You can only make good use of these charts if you have enough knowledge of these candlesticks and their different colors.
Sky Hoon. Read Full Bio
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He has been trading since 2008. He started this blog to share the journey about option trading. He dabbled in stocks, bitcoin, ethereum (in Celsius Network), ETF (lazy Dollar Cost Averaging) and also built websites for fun. He used this as a platform to share my experiences and mistakes in trading, especially options which I just picked up.