Should Each Candle Start from the Previous Candle's Closing Price?

Candlestick Basics

In trading, candlestick charts are used to represent price movements of an asset over time. Each candle typically represents a specific time period (e.g., 1 minute, 5 minutes, 1 hour, etc.) and displays four key price points: the open, high, low, and close. The opening price is where the candle starts, and the closing price is where it ends for that time period.

In a standard candlestick chart, the next candle's opening price is usually the same as the previous candle's closing price. This means that if the previous candle closed at a certain price, the next candle will open at that price, unless there is a gap in the market (for example, if the market opens at a different price due to news or events that occurred after the previous candle closed).

Exceptions to the Rule

While the general rule is that each candle opens at the previous candle's closing price, there are exceptions. Gaps can occur in the market due to various factors, such as economic news releases or after-hours trading, leading to the next candle opening at a different price. This is particularly common in stocks and can also happen in cryptocurrency markets, especially during significant market events.

Conclusion

In summary, while each candle typically starts from the previous candle's closing price, gaps can lead to variations. Understanding these dynamics is crucial for interpreting candlestick charts effectively.