What is a Japanese Candlestick Chart?
The Japanese version of price charting uses a shape similar to a candlestick as a visual representation. The Japanese Candlestick method of visualising charts is one of, if not the, most popular methods of looking at charts for the modern trader.
The way it works is that one candlestick shows the open, high, close and low point of the price at a given timeframe. The shadow or wick shows the distance between the high and the low. The body of the candle, or “real body”, measures the distance between the open and the close. When the close is greater than the open price, then the body of the candlestick is white. This reflects a positive sentiment in the market. When the close is less than the open price, then the body of the candlestick is black. This reflects a negative sentiment in the market.
There are many different shapes and sizes to the candlesticks and the patterns they form, all of which come with their own special names. For example, one of the simplest and most popular candlestick patterns is called The Hammer. This is when the candle has a long lower shadow and a short body, with a tiny or no shadow on top. The Hammer is made up of just one candle and is a type of bullish reversal candlestick. We will be covering trend reversals in an upcoming video. Until then, traders!
