PATTERNS: Candlestick pattern

Technical Analysis Pattern
Technical Analysis Pattern

Candlestick pattern

This page provides brief introduction to the patterns of Japanese Candlesticks Chart. Please note that candlestick pattern recognition is subjective and programs that are used for charting technique must rely on predefined rules.

History It is said that Japanese used technical analysis to trade rice in the 17th century. But according to Steve Nison, candlestick charting came later and probably began sometime after 1850. Much of the credit for candlestick charting goes to Munehisa Homma who was a rice trader from Sakata.

Formation of candlestick Candlestick is formed with the help of opening, high, low and closing price of the day. If the opening price is above the closing price then a filled candlestick is drawn. Normally, black colour is used for filling the candle. If the closing price is above the opening price, then a hollow candlestick (normally displayed in white with black border) is drawn. The filled or the hollow portion of the candle is known as body or real body which can be long, normal or short with proportionate to the line above or below it. The lines (long or short) above and below the body or real body represent the high or low price range and these lines are known as shadows, tails or wicks. For the particular day, the highest price is declared by the top of the upper shadow and the lowest price is marked by the bottom of the lower tail. Please note that the body may or may not have shadows, tails or wicks.

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