In addition, there are a lot of candlesticks, which do not fall into any of these two categories. The determination of short candlesticks can be based on the same methodology as in the case of long candlesticks, with similar results.
It is better to consider the most recent price movements to determine what is long, and what is not.įive or ten previous days - that's quite an adequate period to arrive at a correct conclusion. The term "long" refers to a candlestick body length, the difference between the open price and the close price. Link to long candlesticks is widespread in the literature on Japanese candlesticks. Short bodies mean that the struggle between the bulls and bears was weak. Long bodies of candlesticks, as a rule, tell about pressure from buyers or sellers (depending on the color of the candlestick). According to the theory, some patterns can indicate with a certain probability that the trend is changing, or confirm the trend, or show that the market is indecisive. 1 b), this means the close price was below the open price.Ĭandlesticks can have shadows - the upper and lower, the length of shadows depends on the distance between the open/close prices and the minimum/maximum prices.Ĭandlestick are plotted on the chart one by one, forming various patterns. When the close price is higher than the open price, the candlestick body is white (Fig. The height of the body represents the range between the open and close prices of the trading period. The rectangle representing the difference between the open and close prices, is called the body of the candlestick. Trading principles applied by Homma in trading on the rice market, initiated the technique of Japanese candlesticks, which is now widely used in Japan and abroad.Ĭonsider the structure of a candlestick (Fig. One of the first analysts who started to predict the movement of prices in the future, based on past prices, was the legendary Japanese Munehisa Homma. They are equally suitable for all markets. Japanese candlestick charts can help you penetrate "inside" of financial markets, which is very difficult to do with other graphical methods. After reading and a little practice, candlesticks will be part of your analytical arsenal. The advantage of candlesticks is that they represent data in a way that it is possible to see the momentum within the data.Ĭandlesticks give a vivid mental picture of trading.
Plotting of candlestick charts and analysis of candlestick patterns is an amazing line of technical analysis. "Through Inquiring of the Old We Learn the New"
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