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Japanese Candlestick chart are so named because the line resemble candle with their wick. Candle trading techniques have now become one of the most discussed forms of technical analysis. Candlestick Chart is the oldest type of charts used for price prediction. There are four elements
necessary to construct a candlestick chart, the OPEN, HIGH, LOW and CLOSING price for a
given time period as shown in the figure below. The period can be anything from a minute to a
month. The
body of the candlestick is called the real body, and represents
the range between the open and closing prices. Real bodies can be
either long or short and either red or green. The difference is
the use of color to show if the market was up or down over the period.
When the real body is red, it means the close was lower than the
open. If the real body is green, it means the close was higher than
the open.
The thin vertical line above and/or below the real body is called shadow. Shadows can also be either long or short. It shows the high and a low price of that period's trading. If the upper shadow on the red body is short, it indicates that the open was closer to the high. And a short upper shadow on a green body dictates that the close was near the high. The relationship between the open, high, low, and close determines the look of the candlestick. Candlestick charts are easy to understand because data required to draw this chart is same as
that needed for the bar chart. many traders consider candlestick charts more visually appealing
and easier to interpret. Each candlestick provides an easy-to-decipher picture of price action. Usage The Candlestick charts dramatically illustrate changes in the underlying supply/demand lines.
Immediately a trader can see compare the relationship between the open and close as well as
the high and low. The relationship between the open and close is considered vital information and forms the
essence of candlesticks. Green (or White) candlesticks, where the close is greater than the
open, indicate buying pressure. Red (or Black) candlesticks, where the close is less than the
open, indicate selling pressure. The Japanese Candlestick investing signals have to be considered one of the most tested,
proven technical trading programs in history. There is one dynamically powerful aspect of these
reversal signals. They are created by the change in trader sentiment. Prices of trading entities
move based on the emotional perception of traders. Japanese Candlestick investing signals are
the visual depiction of the accumulative investment decisions pertaining to a trading entity. The
Candlestick trading signals are the refined interpretation of fear and greed. Candlestick tools will give you a jump on the competition. It not only shows the trend of move, as does bar chart, but, unlike bar charts, candle charts also show the force underpinning the move. In addition, many of the candle signals are given in few sessions rather than weeks often needed for bar chart signals. Thus it helps you to enter & exit market with better timing Candlestick charting tools will help to preserve the capital. As the capital preservation is
important in volatile market, it often sends out indications that a new high or new low may not be
sustained. Candlesticks charts can be used in stocks, futures and any market that has open, high, low and close.
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