What is a Japanese Candlestick? | Learn to Trade
Japanese Candlestick Trading
Back in the day when Godzilla was still a pretty little lizard, the Japanese created their own traditional version of technical analysis only to trade rice. That’s exactly, rice.
Then Steve Nison, a Westerner, ‘discovered’ this hush-hush technique called ‘Japanese candlesticks’, studying it from a fellow Japanese broker. Steve studied, researched, breathed, lived, ate candlesticks, and started writing about it. Gradually, this secret technique enhanced in popularity in the 90’s.
Okay, so what basically are the Japanese candlesticks?
The better way to explain is by using a sample picture:
Japanese candlesticks can be utilized on any forex time frame, whether it is 30 minutes, 1 hour, 4 hour, or one day, – whatever you want! They are employed to describe the price action during the chosen time frame.
A Japanese candlestick, which we will refer to just a “candlestick”, is formed using the open, high, low, and close of the particular time period.
- If the close is above the open, then a hollow candlestick (typically shown as white) is drawn.
- If the close is below the open, then a filled candlestick (typically shown as black) is drawn.
- The hollow or filled part of the candlestick is identified as the ‘real body’ or body.
- The thin lines showing above and below the body show the high/low range and are called shadows.
- The top of the upper shadow is the ‘high’.
- The bottom of the lower shadow is the ‘low’.