A candlestick chart is a style of bar-chart used primarily to describe price movements of an equity over time. Image File history File links Candlestick-chart. ... A bar chart is a chart with rectangular bars of lengths usually proportional to the magnitudes or frequencies of what they represent. ... This article is about concept of equity in Anglo-American jurisprudence. ...

It is a combination of a line-chart and a bar-chart in that each bar represents the range of price movement over a given time interval. It is most often used in technical analysis of equity price patterns. Technical analysis (or chartism) is the study of price movement and trend in markets in order to forecast future prices. ...

History

Candlestick charts were developed by Japanese rice traders in the 17th century to have an easy overview of open, high, low and close prices over a certain period. This charting style is very popular because of the level of ease in reading and understanding charts it provides. Since the 17th century, there has been a lot of effort to relate chart patterns to the likely future behavior of a market. This method to chart prices proved to be particularly interesting due to the fact that four datapoints could be displayed instead of one single datapoint, thus containing more information. Those Japanese rice traders also found that the charts resulting from those candlesticks would provide a fairly reliable tool to predict future demand, thus giving them the chance to take advantage of future price fluctuations. Steve Nison's book Japanese Candlestick Charting Techniques called back into traders' memory this particular form of charting, which had already been picked up by Charles Dow around 1900. Today it is one of the most commonly used chart displaying methods with traders. Charles Henry Dow (November 6, 1851 – December 4, 1902) was an American journalist who co-founded Dow Jones & Company and The Wall Street Journal. ...

Candlestick Layout

Candlesticks are usually composed of the body (black or white), an upper and a lower shadow (wick). The wick illustrates the highest and lowest traded prices of a stock and the body the opening and closing trades. If the stock went up, the body is white and the opening price is the bottom of the body and the close is at the top. If it is black, the stock went down and the open is at the top and the close at the bottom. A candlestick does not need both a body and a wick.

Patterns

Simple Patterns

There are multiple forms of candlestick chart patterns, those depicted to your right however are the most simple ones. Here is a quick overview of their names:

1. White candlestick - signals uptrend movement (those occur in different lengths, the longer the more significant the price change)
2. Black candlestick - signals downtrend movement (those occur in different lengths, the longer the more significant the price change)
3. Long lower shadow - bullish signal (the lower wick must be at least the body's size, the longer the lower wick, the more reliable the signal)
4. Long upper shadow - bearish signal (the upper wick must be at least the body's size, the longer the upper wick, the more reliable the signal)
5. Hammer - a bullish pattern during a downtrend (long lower wick & no or only small body); Shaven head - a bullish pattern during a downtrend & a bearish pattern during an uptrend (no upper wick); Hanging man - bearish pattern during an uptrend (long lower wick, no or only small body, wick has the multiple length of the body.
6. Inverted hammer - signals bottom reversal, however confirmation must be obtained from next trade (may be either a white or black body); Shaven bottom - signaling bottom reversal, however confirmation must be obtained from next trade (no lower wick); Shooting star - a bearish pattern during an uptrend (small body, long upper wick, small or no lower wick)
7. Spinning top white - neutral pattern, meaningful in combination with other candlestick patterns
8. Spinning top black - neutral pattern, meaningful in combination with other candlestick patterns
9. Doji - neutral pattern, meaningful in combination with other candlestick patterns
10. Long legged doji - signals a top reversal
11. Dragonfly doji - signals trend reversal (no upper wick, long lower wick)
12. Gravestone doji - signals trend reversal (no lower wick, long upper wick)
13. Marubozu white - dominant bullish trades, continued bullish trend (no upper, no lower wick)
14. Marubozu black - dominant bearish trades, continued bearish trend (no upper, no lower wick)

Basic Candlesticks File history Legend: (cur) = this is the current file, (del) = delete this old version, (rev) = revert to this old version. ...

Complex Patterns

Despite those rather simple patterns depicted in the section above, there are more complex and difficult patterns which have been identified over the past. More complex patterns can be found at E-Charts.Com or StockCharts.com

Scientific Explanation

Candlestick is a just visual aid to human psychology. For example, when the bar is white, it means buyers are very bullish and replenish the buying power to the end of the day without fear. Because of this extreme confidence, stock price tends to continue moving higher the day after. The opposite is true for a black bar.

See also

• Candle line

A candle line is the basic symbol representing the change of data in a candle chart. ...

External links

• Japanese Candlestick Charting Techniques