Japanese Candlesticks are the oldest form of technical analysis. It is a system that has been used since the 1700s to trade. In the beginning, it was used to trade and analyze rice trading. Over the centuries it has become used for many other analyses including but not limited to securities, options, and Forex.

Japanese candlestick charts display market sentiment like no other form of charting can. With candlestick charts you have basically 2 moving parts. (If you will.) The real body, can be full or hallow, and the wicks or shadows can be long or short, or gone – either way, together you get a nice picture of price action today, or over a period of time.

The top of the wick / shadow marks your high for the session. The low wick, below the real body marks the sessions low. The open on a hallow body is marked by the bottom of the body, and the high is the top. A full candlesticks marks its open at the top, and its bottom is the close of the session. So if price closes higher than it opens, you get a hallow candlestick. If price closes lower than it opens you get a full candlestick. (See below.)

Candlestick charts are considered more eye appealing and easier to understand than the ordinary bar or line chart. They are more intuitive and easier to identify immediately, and they also show price action relative to the past. (Best left for another article.)

All candlesticks have a body and a wick or shadow, unless the open close high and low are equal to each other in which case you would have a little dash and that’s it. A white body is an empty body, and a black one is a full body. The empty/white body represents a close greater than the open, and a black/full body represents a close less than the open. The size of the body represents the distance between the open and close.

There are also candlesticks with full bodies and no wicks/shadows. These should be noted and have a name they are called Marubozu’s. The can be black or white (full / empty) and they appear when the open and close of the session are equal to the high and low. With the white/empty candlestick your high is equal to your close. With the black/full your low is equal to your close.

Another important candlestick pattern is a spinning top. Spinning tops are represented by a long or short shadow / wick and a short real body. The short body tells us that there was a small gap between the open and close. If the shadow or wick is long it tells us that the highs and lows of the day moved hard but failed to remain strong. Whichever was long tells you of potential upcoming underlying strength.

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