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What is the Japanese Candlestick

Japanese Candlestick charts which have been in use for centuries represent the magnitude of the price changes with various colors. It is a charting technique developed by a rice trader in Japan, Munehisa Homma. However, it was Mr. Steve Nison who popularized this technique globally by learning it from one of his fellow Japanese traders.

The Japanese Candlestick charts have combined features of a line chart and a bar chart. These candlestick charts are extensively used in technical analysis to depict the Forex trading patterns over particular time frames like 5 mins, 15 mins, 1 hour, 1 week or a year. When a chart is set to be a 10-min candlestick chart, then each individual candle of the chart that is formed will be of 10 minutes duration. Each candlestick describes the action of the price during a given time frame with Open, Close, Low and High prices. Listed below are the guidelines used in Japanese Candlestick:

  • When the close price is above the open price in the Forex market, a white colored or rather a hollow candlestick is displayed.
  • When the close price is below the open price, a candlestick generally filled with black color is displayed.
  • These wide, hollow and filled parts of candlesticks are called their ‘real bodies’.
  • These real bodies have small lines like wicks connected to their top and bottom called shadows. These lines display the high and low prices respectively of the given time frame.

In any trading market, you can’t escape from risk but you can adopt various types of analysis tools to gain confidence and increase your success rate. Often used along with other types of market charts and graphs, Japanese Candlestick can be used to understand price movements and act accordingly.  

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