Reading Candlestick charts
candlestick chart was developed in Japan more than 100 years before the West developed bar charts and point and figure charts. In the 1700s, a Japanese named Homma discovered that the market was also heavily influenced by traders' emotions, as there was a correlation between the price and supply and demand for rice.
A daily candlestick chart shows the open, high, low and close prices of the day. The wide or rectangular part of the candlestick is called the "body" and shows the relationship between the opening and closing prices.
This entity shows the price range between the opening and closing prices of the trading day.
If the body is filled with black or red, it means that the closing price is lower than the opening price, it is called a bearish candlestick. This shows that the price has opened and the bears have pushed the price down, breaking below the opening price.
If the body is empty, white or green, it means that the closing price was higher than the opening price and is known as a bullish candle. This shows that the price has opened and the bulls have pushed the price higher and closed higher than the opening price.
The thin vertical lines above and below the entity are known as cores or shadows representing the highs and lows of the trading session.
The upper shadow shows the highs and the lower shadow shows the lows reached during the trading session.
Before learning about different candlestick charts, you should remember some assumptions specific to candlestick charts.
Strength is represented by bullish or green candles and weakness is represented by bearish or bearish or red candles. I need to make sure that every buy is a green candle day and every sell is a red candle day. Note that while the textbook definition of the
pattern provides some standard, the pattern may vary slightly depending on specific market conditions.