The key to investment profits: quickly understand the changes in rises and falls!

If tools are learned to effectively help in stock selection, after choosing good stocks, when should Buy and Sell be executed, and how can profits be achieved?

You might think that figuring out these issues is complicated, but the underlying principles remain the same; once the concept of candlesticks is understood, it becomes much simpler!

Futubull summarizes it in one sentence: just like using sheet music to record the scales, rhythm, etc., we use candlesticks to record price fluctuations and changes in market sentiment over a period.

But don’t the red and green shapes and changes seem a bit confusing at first sight? No need to rush; Futubull will explain it to you slowly.

What is a candlestick composed of?

First, let's focus on a daily candlestick. Each candlestick consists of three parts (upper shadow line, lower shadow line, body) and four prices (opening price, closing price, highest price, lowest price).

What do they each represent? The four prices can be understood literally, so Futubull will not elaborate further.

The color indicates whether the stock price closed higher or lower for that day. According to international conventions, green typically represents an increase and red a decrease, though in some places red signifies an increase and green signifies a decrease. One can set their preferences for 'red up green down' or 'green up red down' in the Futubull app, but the explanations will proceed based on 'green up red down'.

The body is composed of the area between the opening price and the closing price. The upper shadow shows the distance between the highest price of the day and the opening/closing price, while the lower shadow shows the distance between the lowest price and the opening/closing price.

Whether the opening price is higher or the closing price is higher relates to whether it was an up day or a down day (meaning the body is green or red). If it's an up day, then the closing price is higher than the opening price; if it's a down day, it is the opposite.

Speaking of this, do you think there is any mistake in the two candlesticks above? If so, where is the mistake? You can think about it first; the answer will be revealed at the end of the article.

What do different candlestick shapes represent?

From the two candlesticks above, we can also see that candlesticks actually come in many shapes. What do the different shapes represent in terms of stock price and emotional changes? Futubull has simply categorized them according to the strength of buyers and sellers, let's take a look together.

At this point, have you grasped the relationship between the shapes of candlesticks and the strength of buying/selling as well as stock price trends?

Futubull gives you one more summary: the length of the body reflects the strength of the winning side; the longer it is, the stronger it is; the length of the shadows reflects the degree of the struggle between buyers and sellers; the longer it is, the more intense the struggle.

Is it clearer now? Futubull will test you again; see which candlestick corresponds to the trend chart below; the answer is also at the end of the article.

Futubull has a few last words.

What we introduced above is the daily chart, where each candlestick represents the changes of one day. In fact, there are also minute charts with intervals of 1 minute, 1 hour, 1 week, 1 month, 1 quarter, and 1 year, where each candlestick represents the price changes over those respective timeframes.

Additionally, candlesticks are different from the moving average line MA you may have heard of. For example, the 5-day moving average MA records the average price over every 5 trading days, and then connects these average prices to see how they change. There are also moving averages for 10 days, 20 days, 30 days, 60 days, and 120 days, etc.

If candlesticks represent the ups and downs of price fluctuations, MA seems to be more like recording lateral changes. Combining candlesticks and moving averages can help us better analyze price fluctuations, market sentiment, and determine trends. For more understanding of technical analysis, you can study."Practical Trading with Common Technical Indicators".。

Alright, this is all that Futubull has to share today, hoping it helps you. Finally, let's see if you got the answers to the two questions above right.