What is a Japanese Candlestick?

I

n the 18th century a Japanese rice merchant, named Munehisa Homma developed a technical analysis method to analyze the price of rice contracts.

Today this technique is called candlestick charting and is widely used when drawing charts. 

This Japanese businessman began trading at the local rice exchange around 1750. He kept records of market psychology learning to boost his profits by carefully monitoring prices and not rushing into trades.

Homma is known as the “GrandFather of candlesticks chart” because of his research on price patterns. 

But why was he the GRANDfather and not the father? Continue reading.

Japanese Candlestick Trading

Nobody knew about this method until Steve Nison brought the concept of the Japanese Candlestick technique to Europe. 

Slowly, this secret technique grew in popularity in the ’90s.

Steve Nison became widely credited for bringing candlestick charting to the Western world. 

He wrote many books on the basis of how the Candlestick technique works. 

What are exactly the Japanese candlesticks?

The candlesticks provide a graphical representation of price movement.

Each candlestick represents a period of time that can span seconds, minutes, hours, days, weeks, months or years.

Japanese candlesticks are formed using the open, high, low, and close of the chosen time period.

  1. If the opening price is less than the closing price then the body of the candlestick is green (different software can use white or blue). A very long white body or bar indicates that there was aggressive buying in that time period.
  1. If the opening price is more than the closing price then the body of the candlestick is red (different software can use black as a colour of the body). A very long red body or bar indicates that there was aggressive selling (fear) in that time period.
  1. The hollow or filled section of the candlestick is called the “real body” or body.
  1. The thin lines poking above and below the body display the high/low range and are called shadows.
  1. The top of the upper shadow is the “high“.
  1. The bottom of the lower shadow is the “low“

You still don’t get how this candle holder can help you trade, do ya? Jump onto the next pages to make you believe, it really does help you!

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