Candlestick Technical Analysis : An Introduction

The Japanese candlestick, hereafter simply referred to as candlestick or candle, is a very effective way to convey the open, high, low, close price points for the period in question, which may be minute, hour, day, week, etc. as supported by the charting software.

The body of the candlestick is defined by the open and close prices. The tails of the candlestick (some call them wicks or shadows) indicate the high and low prices. A color or shading convention is used for the body of the candlestick to convey the up/down direction of the candlestick. An up candle has the closing price higher than the opening price. A down candle has the closing price lower than the opening price. Colors used for the body include red and blue for down candles; green and white for up candles – subject to the convention used in the charting software which may allow user customization.

Visually, candlestick charting is very effective in conveying the up and down periodic movements of the stock price. At a glance, the user is able to see whether a stock closed higher than its opening price (up candle), or vice versa, a stock closed lower than its opening price (down candle). The length of the body as well as the tails show the range of price movement for the stock. And the user is able to follow the progression of candlesticks in successive periods.

There are various candlestick patterns such as doji and hammer (just to cite two from the long list of patterns which may span 1, 2, 3 or even more periods) that are used in candlestick technical analysis where significant conclusions are attached to each pattern.

More you might like

Applicability of Stock Market Products and Services

This article provokes your thoughts on the applicability of stock market advice, products and services as it relates to your stock market trading (success).

State of the Economy and the Stock Market Outlook

This article examines the state of the stock markets as economic conditions transpired over the past year and how to deal with the outlook for recovery.

Stock Trading in Private Companies

Buying and selling of private company shares in secondary market exchanges.

React to Technical Analysis Indicators to Trade the Rise and Drop in Stock Prices

This article examines the approach of trading stock price cycles as a means to achieve repeated trading profits in short-term trading. Take what the stock markets will give you.

Trading Observations and Evaluation (March/2009)

This article covers my trading observations and evaluation in the month of March/2009. Different trading ideas are examined.