Understanding Candlesticks_1. Candlesticks

Lesson 1: Candlesticks

Candlestick trading is a very powerful tool in technical analysis. It provides us
with great sentiment and market condition insights and even signals trend changes
and price reversals.

Candlesticks originated in 17th-century Japan and it’s believed they were used
by rice traders to track historical price movements in the rice market; now, it has
become the basis of Japanese investment philosophy.

Only as recently as the 1990s were the candlestick charting techniques
introduced to the West by a trader, Steve Nison. Since then, candlesticks have
gained huge popularity and nowadays can be found in every charting platform.

Here’s a quick recap about Candlestick anatomy: The big blocks are called real
bodies. The vertical lines above these blocks are upper shadows and the lines below
are called lower shadows.

For a bull candle, here is the open, low, high and close - and similarly, if it is a
bear candle, the open, high, low, and close are given.

Large real bodies indicate strong buying or selling; small bodies show that there
has been low buying or selling pressure. Shadows indicate how high or low the price
has been in a particular session. If the price is long, the traders push it back towards
the opening price.