Candlestick

This is the oldest type of chart that used to predict price movement. It is developed by Munehisa Homma, Japanese trader, in 1700’s. Is it that accurate? Well, nothing works all the time in market. But he (read: Munehisa Homma) claimed to have over 100 consecutive winning trades using this method!

Ok, now let’s start to learn the basics knowledge of candlestick.

There are two types of candlestick according to its opening and closing price position.

Those are:

1. Empty/Clear Candlestick, that describes strength

The bottom corner is the opening price and the upper corner is the closing price. Note that some of you might have different color with mine. Check out you chart’s background. If it’s black then your empty candlestick should colored black as mine.

But if your chart’s background is not black colored then your empty candlestick would have the same color as your chart’s background color.


2. Shaded Candlestick, that describes weakness

The upper corner is the opening price and the bottom corner is the closing price.

Note that some of you might have different color with mine. Check out you chart’s background. If it’s black then your shaded candlestick should colored white as mine.

But if your chart’s background is not black colored then your shaded candlestick would have a different color as your chart’s background color.


Note:
I will always use the black color background in every picture of this article.

Now, let’s identify the whole shape of those candlesticks.

Explanation:
1. Real Body, is the shape that starts from the opening price and ended at the closing price.
2. Shadows describe high levels of the period and low levels of the period.
3. Range (real body+shadows) is the whole candlestick. Starts from the high level and ended at the low level.

Empty Candlestick

Shaded Candlestick

Understanding the basic concept of candlestick, now let's learn some basic pattern. Click here to read more about candlestick pattern.