In terms of financial markets, a wick is simply a vertical line that helps you visualize the high and low ranges of price action. This means that when reading a typical candlestick chart, traders will focus, among other things, on three key points â the opening price, the closing price, and the candlestick wicks.
The wicks themselves show extremes in prices, allowing traders to better understand market sentiment and momentum. This means that as the price moves in relation to the opening and closing price, wicks are formed as a visual record of such movement.
The candlestick pattern is created based on the open, high, low, and close of a market. The âboxâ portion of the candlestick is known as the body, whereas the lines on either end are the wicks (representing associated highs and lows).
The length of the wick is also relevant. For example, when there is a long wick at the bottom of the candle, it indicates that the price went all the way down and back up again before the close of the candle. This suggests an increase in buying right after a period of selling pressure. This is why some technical analysts believe that a long wick will often indicate price reversal, moving the market in the opposite direction of that wick.
Alternatively, there is also the possibility of a wickless candle. These candles look like a square or rectangle because the closing and opening prices coincide with the high and low marks of that particular candlestick.