Candlestick Charts

Candlestick charts sound like something from a holiday album, yet they are of major importance in technical stock analysis. As far back as the 17th century, Japanese analysts used the candlestick charts method for their rice trade. Even now in the 21st century analysts are using this candlestick charts method. Candlestick charts are a true method of technical analysis in investments.

Candlestick Charts - The body

To look at candlestick charts, one must envision an actual candlestick. Each of the bars on a chart is called a candlestick, with the empty or filled portion called the candlestick while the lines above or below are called shadows. These shadows represent high and low ranges for the particular stock they are representing. Within a day, each stock has lows and highs, so the shadows of the candlestick charts represent the volatility of a stock’s day. A sizeable move is represented by a long white candlestick, and this can mean potential support. Black candlestick charts can mean the opposite.

Candlestick Charts - Marubozu

Although understanding candlestick charts may seem simple, they are not. One type of the candlestick charts is called a Marubozu. It sounds like an exotic destination, but what it means is that these candlestick charts have no shadows, meaning the day’s low and high prices were at the open and close. This term means that the price action was controlled by either a buyer or seller through the trading day so the candlestick charts would show no upper or lower shadows.

Candlestick Charts - Shadows

Candlestick charts can contain long, short, or no shadows. If candlestick charts have a long shadow, it means trading was active. Short shadows on candlestick charts mean that most activity was centered on the open or close. If buyers were the overlying source through the session, candlestick charts may have a short lower shadow and a long upper shadow. However, candlestick charts with a long upper and lower shadow indicates something called a spinning top. Candlestick charts can have a long shadow couple with a short shadow, which could indicate a daily reversal. Candlestick charts like this would highlight investor indecision.

Candlestick Charts - Doji

When a stock opens and closes in the same area, the candlestick charts is called a doji. This candlestick chart is equivalent to a neutral pattern yet has plus signs. The doji candlestick charts have a long shadow at one end and a short shadow at the other end. Other names for Doji candlestick charts are long-legged, dragon fly, or gravestone.

Candlestick Charts - Basics

Candlestick charts can be basic, yet intricate. To understand candlestick charts, one must understand the more intricate aspects of candlestick charts. Each candlestick chart could have its own analysis, with its own name. However, the positioning of a candlestick chart can lead to the investigation of how it’s formed. It’s best to review the patterns and complications of candlestick charts.