Introduction to Candlestick stock market
Candlestick charting was discovered in Japan. Comparing with all other types of chart, we will see that candlestick charting is much more efficient and useful charting system, which provides immediate clarity.Signals are interpreted by study of single and combination of candle formations. Candlestick charts provide great clarity. Once you are familiar with candlestick charting, no other charting types will attract you more than candlesticks.
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- Patterns formed due to combined candles gives vital signals at different stages of market continuation or reversals.
By combining more than two candles, one can predict whether the present advance or decline will more forward or not.In most charting software’s option for candlestick charts is present. Once you acquire the skill to spot the patterns, one can get very good and accurate results in long run.
First let us understand the basic candle formations.
BULL CANDLE
Upper Shadow
Real Body →
-High
+Close
Lower Shadow
+ Open Low
BEAR CANDLE
Upper Shadow
Real Body →
-High + Open
Lower Shadow
+ Close Low
As shown above, a candle formations consists of
- 1.Real Body
- 2.Lower Shadow
- 3.Upper Shadow
1.Real Body
The central part of the candlestick is called real body. The size of the real body depends on the extent of increase or declines in the price compared to the previous day.
. If the rise or fall is limited, a small white or red candle is formed. If the rise or fall is large, a long white or red candle is formed.
⚫ Candle formed due to positive price difference can be colored white; blue or green, while that with the negative price difference can be colored, red or black.Choice of colors is an individual matter. There is no compulsion towards which color to use.If there is negligible price difference compared to the previous day, or no price difference, then the candle that forms is called a Doji.
Lower Shadow:
This is the line forming on the lower end of the real body, which represents the low of the day.
Upper Shadow:
This is the line forming on the Upper end of the real body, which represents the high of the day.
