Candlestick charting
was popularized in Japan and has received
world wide recognition. Each candlestick is
composed of four values, the high, low, open
and close. The advantage to this form of charting
is that it provides more visual information
about the trading day as well as many trading
signals to help decision making.
The
body of the
candlestick
(or jittai)
is the open
and the close
of the trading
day. The high
and the low
of the day
create the
upper and
lower shadows
of the main
candle body.
(Most
charting programs
will allow
you to use
other colors
in the bar,
typically
green for
white candle
and red for
black candle)
Types
of Candles
With
candlestick
charting,
there is quite
a lot of terminology
and meaning
towards the
types of patterns
encountered.
Significance
is given to
the size ot
the shadows,
the size of
the candles
as well as
the pattern
the candles
form.
A
marabozu,
or "shaved
head",
is a candlestick
with no shadows.
This is where
the open and
close prices
are similar
to the high
and low.
An
opening
bozu in
a white candlestick
is when there
is no lower
shadow (opens
at the low)
and in the
case of the
black candlestick
an opening
bozu has no
upper shadow
(opens at
the high).
A
closing
bozo in
a white candlestick
is when there
is no upper
shadow (it
closes at
the high)
and in a black
candle a closing
buzo is when
there is no
lower shadow
(it closes
at the low).
Doji
A
Doji
candlestick
is one of
the more common
candlesticks.
The Doji signifies
a balance
of buyers
and sellers
and shows
an indecisiveness
in the price.
Doji's are
not very significant
by themselves,
but if a Doji
occurs after
a large candle
a stronger
signal is
generated
(see bullish
and bearish
patterns).
Size
of Candles
 |
The
size of
the candlestick
gives
the trader
an indication
of buying
(white
candle)
or selling
(black
candle)
pressure.
The larger
the candle,
the more
buying
and selling
pressure,
short
candlesticks
on the
other
hand represent
a period
of consolidation
and weak
buying
or selling
pressure.
|
Size
of Shadows
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|
Upper
shadows
represent
buyer
action
which
pushes
the
price
up.
Lower
shadows
represent
seller
action
which
pushes
the
price
down.
The
size
of the
shadows
tells
us the
amount
of price
action
that
occured
during
the
day
as well
as the
activity
of buyers
and
sellers.
Short
shadows
show
a balance
of buyers
and
sellers
(a consolidation).
|
 |
If
both
shadows
are
short
(as
well
as the
candle),
this
represents
a weak
trading
day
where
prices
had
little
movement.
This
shows
a balance
of sellers
and
buyers.
If there
is low
volume
with
a short
small
candle,
this
shows
a weak
market
day.
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Candles
with
a long
upper
shadows
and
a small
lower
shadow
represents
a trading
day
were
the
buyers
forced
the
price
up during
the
trading
day
but
sellers
later
won.
Candles
with
long
lower
shadows
and
small
upper
shadows
signifies
that
the
sellers
dominated
the
opening
while
the
buyers
pushed
the
price
up at
the
end
of the
session.
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