Now that we are going to discuss the candlestick chart instrument that was explained in the previous lesson, let's get started!
In the past Japan created its own version of technical analysis for rice transactions.
Then came a man named Steve Nison “discovered” this technique called “Japanese candlestick,” he learned it from a fellow Japanese broker.
Steve started researching, studying candlesticks and then writing about his theory.
Slowly, this instrument grew in popularity in the 90s.
In short, without Steve Nison, candlestick charts might remain a buried secret.
Steve Nison is Mr. candlesticks.
What are Japanese candlesticks?
Look at the image below:
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Candlestick charts are effective for any timeframe; 1 day, 1 hour, 30 minutes - as long as the time-frame you mean!
These charts are used to depict price activity over a certain time frame.
To be able to form a candlestick, data is needed for the opening price (Open), the lowest price (Low), the highest price (High), and the closing price (Close).
- If the closing price (close) is above the opening price (Open) then the candlestick will be colored green or white, meaning that the price is moving up or "Bullish".
- If the closing price (close) is below the opening price (Open) then the candlestick will be colored red or black, meaning that the price is moving down "Bearish".
- The colored part of the candlestick is called the "Body".
- The line below or above the "Body" is called the "Shadow" or shadow that describes the range of the highest (High) and lowest (Low) prices during the trading session.
- The high point of the line under the "Body" or "Lower Shadow" is the lowest price (Low).
- The top point of the line above the "Body" or "Upper Shadow" is the highest price (High).