The Japanese Candlestick charts show the range of the opening and closing prices, as well as the highest and lowest points. The main element of a japanese candlestick is the body shaped as a cylinder, which shows the range between the opening and closing prices. Shadows on the top and bottom of the candle show the lowest and highest prices.
The color of the candle depends on the price direction in a certain time interval and also indicates the current trend - bullish or bearish. For example, if a stock closed lower, the body is black. If it closed higher, the body is white.
How to interpret the japanese candlestick charting techniques and patterns
• Equal opening and closing prices are displayed on the chart by one horizontal line, while the body is in the form of a cross.
• If the opening price is higher than the closing price, the body is black, indicating a fall in the market (the bearish trend).
• If the opening price is lower than the closing price, the body is white, indicating growth in the market (the bullish trend).
• The length of the candle shows the range between the opening and closing prices.
Once all the elements of the candle are fixed and the body is complete, the figure moves to the right and a new candle starts to form on the next time interval. The chart is a sequence of candles that reflects price dynamics. Thus, candlestick analysis allows the trader to save time and make right decisions.