What are Candlestick Charts?
Sometimes referred to as bar charts or graphs, candlestick charts are one of the easiest forms of visual illustration when it comes to understanding the movements of a security over a specified period of time. Simplistic in design, the candlestick chart makes it easy for even the most inexperienced of investors to gain an understanding of the opening, high, low, and closing prices of any given investment opportunity. Candlestick charts are generally understood to be a product of the 18th century. The credit for developing the charts is attributed to the Japanese trader Homma Munchisa. The idea was to gather all the technical analysis related to the activity of securities into one easy to read resource. The various movements on the chart create a design that appears to be a series of candles of different heights. At a glance, it is possible for the observer to grasp the upward and downward price movement of all sorts of stocks, bonds, commodities, and options. As a quick and easy tool t
Japanese candlestick (also called candle) charts, so named because the lines look like candles with their wicks, are Japan’s most popular form of technical analysis. Candle charts are more than 100 years old and, as such, are older than western bar charts and point and figure charts. Yet, these charts were unknown to the western world until I revealed them in the 1980s. The Benefits of Adding Candle Charts to Your Trading Arsenal Candle charts are easy to understand: Anyone, from the first-time chartist to the seasoned professional, can easily harness the power of candle charts. Candlestick charting tools will give you a jump on the competition: Many of the candle signals are given in a few sessions, rather than the weeks often needed for a bar chart signal. Thus, candle charts will help you enter and exit the market with better timing. Candlestick charting tools will help preserve capital: You will discover that the candles shine in helping you preserve capital because they often send
The elements on a candlestick chart display the open, high, low, and closing prices of a security for each time period on the chart and look something like a candlestick with wicks at both ends. You can use candlestick charts to interpret the relationship between these prices. The wider candle portion is called the “real body” and shows the days open and close prices. The narrow vertical line or wick, called the “shadow,” shows the high and low price range for the day. When the close is higher than the open, the body is not filled or is left white. When the close is lower than the open, the body is filled in or is colored black.
You may be asking yourself what exactly pre-electricity lighting has to do with technical stock analysis — rest assured, candlesticks are a tried and true method of technical analysis. In fact, this method dates back to the 17th century when the Japanese used this analysis in the rice trade. Market historians peg the period of time after 1850 as the origin of candlestick charting, but this method’s ancestry lies in charting performed by a rice trader (named Homma) for the town of Sakata. Let’s first take a look at a candlestick chart, then we will examine the different facets of the trading tool. Each of the individual bars on the chart are called candlesticks. The empty (or filled) portion of the candlestick is known as the body (a.k.a. the real body). The thin lines extending above and below the body are called shadows, and represent the high/low range for the stock. If a stock advances on the day, the body is hollow (white bars in the above chart) and the bottom of the body is draw
