The most used chart type: Japanese Candlesticks
Japanese candlesticks are a graphical representation of the price of an asset in the form of candlesticks. Japanese candles are made up of a body and 2 wicks. A Japanese candle is a figure that shows the evolution of the price of an asset in a given period.
Candlestick charts are now widely used by traders who trade stocks, futures, forex, indices, or commodities., due to the large amount of information they provide. It is a great tool to make Trading. In addition, the trader can identify patterns or shapes in the candles, which help him anticipate some market movements with greater probability of success.
How a Japanese candle is made
Japanese candlesticks are made up of two parts, the body and the shadows. Below is a more detailed video.
In the previous video we see that the body of the candle is the difference between the opening and closing price. In the case of them bullish japanese (green or white) are formed as soon as the closing price is higher than the opening price. In the case of bearish candlesticks (red or black) they form as soon as the closing price is lower than the opening price.
Types of Candles
The types of candles can be classified as:
- Pinbar or hammer sail: These candles are characterized by a long wick and a small or non-existent body and indicate that the previous movement cannot be maintained.
- doji candles: is a type of sail that reflects indecision in the market by investors, they do not define the start or end of a trend, rather represents uncertainty in the market. They are very similar to pinbar or hammer candles.
- Full-bodied sail: These are candles with very large bodies and very short or negligible shadows. This type of candle tells us that the movement has been unidirectional and that there were not many doubts about whether to buy or sell.
- surround pattern: succession of two candles of different colors where the close of the first candle coincides with the open of the next, and the close of the second coincides with the open of the first.
In general, these are the most common candles and the most widespread names to name them. However, there are many names or nicknames for each of them.
Keep in mind that the candles alone do not tell us much, they give us clues, but if we combine them with their location in the general context of the price, and combine them with the volume, they give us a greater chance of success in making decisions.