Image by Isaac Smith on Unsplash

Candlesticks — A dataviz marvel

No, this post is not about technical analysis of a stock. I am writing this to bring out the beauty of data visualization or dataviz as it’s fondly referred to in the data community.

Let’s look at an example.

As you know, stocks are traded on the exchange whenever buyers and sellers agree on a price. This could happen very frequently i.e. multiple trades in minutes or seconds. For the purpose of this example, let’s say there are tens or hundreds of trades of a stock happening at different prices in a minute.

You are an analyst interested in tracking the price of this stock over a period of time. What are your options ?

  1. Line chart

The simplest one. You can simply plot the price on the y-axis over days on the x-axis as shown below.

Line chart of Apple stock (Source : www.seekingalpha.com)

While this is good start, it only shows closing price of the stock on any given day.

The above line chart will not convey any information about intraday movements of the stock. How can we represent this additional information ?That’s where candlesticks are helpful.

2. Candlesticks

The chart below is a candlestick version for the same time period.

Candlestick chart of Apple stock (Source : www.seekingalpha.com)

Looks clunky isn’t it. Let’s zoom in a bit to last two weeks only (ignore the bottom bars, those are volumes not prices).

Candlestick chart of Apple stock (Zoomed in)

Each daily candle conveys following information about the stock price.

1.) Open/Close price — Horizontal bases of the candle

2.) High — Top wick of the candle

3.) Low — Bottom wick of the candle

4. Note that, color has been used as an additional dimension to indicate whether stock closed higher than its open price (Green) or vice versa (Red). This means, for Green candles lower horizontal base of the candle is the Open price and upper horizontal base is the Close price (vice-versa for Red).

While the above example shows candlesticks by day, they can be plotted by hours or even minutes.

Candlesticks patterns are used by traders to understand demand, supply and price discovery of a stock. Traders take positions based on these patterns (which is beyond the scope of this discussion).

The takeaway is, there are elegant ways of representing high velocity data by overlaying them into existing visualization options like line charts. Candlesticks are just an example.

What do you think ?

--

--

--

Lifelong learner

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

Performing Analysis of Meteorological Data

Prediction of Customer Churn in a Bank Using Machine Learning

Using Dataflow to Extract, Transform, and Load Bike Share Toronto Ridership Data into BigQuery

D4S Sunday Briefing #55

Linked List Data Structures

Do Good Marketers Need to Understand Big Data?

10 Months Immersive Data Science Bootcamp at Flatiron

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Harish Daryani

Harish Daryani

Lifelong learner

More from Medium

Data Science One on One — Part 11: Gauss-Markov and Central Limit Theorem

Enmeshed in Real-Estate and Infrastructural Projects — Development at The Expense of Fragile Basai…

Exploratory Analysis for TimeSeries Forecasting on Crypto-Assets by G-Research

Predicting Corner 3 Shooting