What is Candlestick Chart? Types of Candles Explained | Intraday Technical Analysis Basics Malayalam

Introduction

This tutorial provides a comprehensive overview of candlestick charts, essential for anyone interested in intraday trading and technical analysis. Understanding candlestick patterns will enhance your ability to make informed trading decisions in the stock market.

Step 1: Understanding Candlesticks

• Candlesticks are graphical representations of price movements over a specific time period.
• Each candlestick consists of:
  • Body: Represents the opening and closing prices.
  • Wicks (or Shadows): Indicate the highest and lowest prices during that period.
• A candlestick can be bullish (closing price higher than opening) or bearish (closing price lower than opening).

Step 2: Types of Candles

• Bullish Candlestick:

  • Indicates a price increase.
  • Appears as a filled or colored body (often green).

• Bearish Candlestick:

  • Indicates a price decrease.
  • Appears as an empty or colored body (often red).

• Doji:

  • Represents indecision in the market.
  • The opening and closing prices are nearly the same, resulting in a very small body.

• Hammer and Shooting Star:

  • Hammer: Found at the bottom of a downtrend, signifies potential reversal.
  • Shooting Star: Found at the top of an uptrend, suggests a potential reversal downward.

Step 3: Analyzing Candlestick Patterns

• Look for patterns formed by multiple candlesticks:

  • Engulfing Pattern: A small candle followed by a larger opposite candle, indicating a potential reversal.
  • Morning Star: A three-candle pattern signaling bullish reversal.
  • Evening Star: A three-candle pattern signaling bearish reversal.

• Recognize the importance of context; patterns are more significant when they occur at key support or resistance levels.

Step 4: Applying Candlestick Analysis in Intraday Trading

• Use candlestick analysis to make trading decisions:

  • Identify trends using candlestick patterns.
  • Combine candlestick analysis with other technical indicators (e.g., moving averages) for a stronger signal.

• Set entry and exit points based on candlestick formations:

  • Enter trades when a bullish pattern confirms an upward trend.
  • Exit trades when a bearish pattern signals a potential decline.

Conclusion

Understanding candlestick charts is crucial for effective intraday trading. By mastering the various types of candles and their patterns, you can make more informed decisions in the stock market. As a next step, consider practicing your skills on a trading simulator or demo account to gain confidence before trading with real capital.