Candlestick Charts Charting Basics

Online Stock Trades - Technical Analysis using Candlestick Charts and Candlestick Charting

Candlestick charts, sometime called stock market candlesticks or candlestick charting or Japanese candlesticks charts is a type of stock market or forex charting or technical analysis similar to bar charts used to chart price movements of an asset over time.

A candlestick chart combines a line chart and a bar chart. It is widely used in technical analysis of stocks, shares, forex, indices etc... in an attempt to predict future price movement.

Candlestick charts are commonly believed to have been devised in 18th century Japan by rice trader Homma Munehisa. Using candlestick charting as a means for prediciting commodities price movements i.e. rice gave Homma an understanding of open, low, high, and closing prices over a given period of time.

One reason candlestick charts are so popular is because the charts produced are easy to read and understand. Japanese rice traders found that the charts produced provides a reasonably reliable tool to predict future demand, but they are of course not fool-proof.

The candlestick charting method was adopted by Charles Dow and has been in common use by traders on stock markets ever since. They act as a simple visual aid for decision making. when the body is green (or white) it means buyers are bullish, when the body is black (or red) buyers are bearish.

There are however many other factors to be taken into consideration in technical analysis than just the color of the body. For example a long shadow (or wick or tail) below the body is a bullish signal (the lower shadow must be at least the same size as the body; the longer the lower shadow the more reliable the signal)
a long upper shadow is a bearish signal (the upper shadow must be at least the same size as the body; the longer the upper shadow, the more reliable the signal).

Fortunately in this Internet day and age you don't have to read through weighty tomes to understand candlestick charting or any other form of charting, because it's all on Youtube ! Check out the candlestick training videos from - YourTradingCoach.com
Home : Online Stock Trading