Candlestick
What is a
'Candlestick' ?
A candlestick is a chart that displays the high, low, opening and closing prices of a security for a specific period. The wide part of the candlestick is called the "Real Body" and tells investors whether the closing price was higher or lower than the Opening price. Black/Red indicates that the stock Closed Lower and White/Green indicates that the stock Closed Higher.
The candlestick's shadows show the day's High and Low and how they compare to the Open and Close.
A candlestick's shape varies based on the relationship between the day's high, low, opening and closing Prices.
Candlesticks reflect the impact of investor sentiment on security prices and are used by technical analysts to determine when to enter and exit trades.
The Japanese began using technical analysis to trade rice in the 17th century.
While this early version of Technical Analysis [TA] was different from the US version initiated by Charles Dow around 1900, many of the guiding principles were very similar :
- The “what” (Price Action) is more important than the “why” (News, Earnings, and so on).
- All known information is reflected in the Price.
- Buyers and Sellers move Markets based on expectations and emotions (fear and greed).
- Markets fluctuate.
- The actual price may not reflect the underlying value.
According to Steve Nison, candlestick charting first appeared sometime after 1850. Much of the credit for candlestick development and charting goes to a legendary rice trader named Homma from the town of Sakata. It is likely that his original ideas were modified and refined over many years of trading eventually resulting in the system of Candlestick Charting that We use today.
In order to create a Candlestick chart, you must have a data set that contains Open, High, Low and Close values for each time period you want to display.
The hollow or filled portion of the candlestick is called “the body” (also referred to as “the real body”). The long thin lines above and below the body represent the high/low range and are called “shadows” (also referred to as “wicks” and “tails”).
The High is marked by the Top of the Upper shadow & the Low by the Bottom of the lower shadow.
If the stock closes Higher than its opening price, a hollow Candlestick is drawn with the bottom of the body representing the opening price and the top of the body representing the closing price.
If the stock closes Lower than its opening price, a filled Candlestick is drawn with the top of the body representing the opening price and the bottom of the body representing the closing price.
Candlestick Patterns
What are
'Candlestick Patterns' ?
Candlestick Patterns is a type of Stock Pattern that you can easily recognize on a stock chart and it allows a chart pattern trader to interpret a stock chart better than Bar Chart, Line Chart, Dot Chart or any other type of stock charts. Candlestick allows a trader to get stock ideas and find Bullish stocks to go Long or Bearish stocks to go Short.
Candlestick Patterns are important stock patterns in technical analysis. It is originated from Japan and is now widely use by Wall Street Traders as well as retail traders across the world. Candlestick Patterns work well in any financial market such as the stock market, Forex Market, Futures Market and any other Markets.
In addition, Candlestick Patterns work well for Day traders, Swing traders and Long term investors.
Each Candlestick Pattern on its own has no meaning. Instead, a Trader will have to study a Group of Candlestick Patterns to get a hint whether or Not a Stock will go up. Fortunately, you don't have to do this on your own, there are many well established Candlestick Patterns that you can use.
