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What is a Japanese Candlestick?

A candlestick chart is a style of bar-chart used primarily to describe price movements of a security (finance), derivative, or currency over time.

It is a combination of a line-chart and a bar-chart, in that each bar represents the range of price movement over a given time interval. It is most often used in technical analysis of equity and currency price patterns. They appear superficially similar to error bars, but are unrelated.

Candlestick charts are said to have been developed in the 18th century by legendary Japanese rice trader Homma Munehisa. The charts gave Homma and others an overview of open, high, low, and close market prices over a certain period. This style of charting is very popular due to the level of ease in reading and understanding the graphs. Since the 17th century, there has been a lot of effort to relate chart patterns to the ldata points instead of one. The Japanese rice traders also found that the resulting charts would provide a fairly reliable tool to predict future demand.

Candlestick chart topics

Candlesticks are usually composed of the body (black / white) or ( Green / Red ), and an upper and a lower shadow (wick). The wick illustrates the highest and lowest traded prices of a security during the time interval represented. The body illustrates the opening and closing trades. If the security closed higher than it opened, the body is white or unfilled, with the opening price at the bottom of the body and the closing price at the top. If the security closed lower than it opened, the body is black, with the opening price at the top and the closing price at the bottom. A candlestick need not have either a body or a wick.

To better highlight price movements, modern candlestick charts (especially those displayed digitally) often replace the black or white of the candlestick body with colors such as red (for a lower closing) and blue or green (for a higher closing).


WELL EXPLAINED BELOW

Green bodies show increased buying pressure and Red bodies show increased selling pressure.

A long body has a very long body when compared with other recent candles.

A short body candle usually implies consolidation, as the forex market traded in a narrow range during the trading period.

The body of the candle indicates where price “opened” for that timeframe and where price “closed”. The “wicks” at the top and bottom of the candles, indicate the “high” and “low” price for that period.


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