Stock Candlesticks Charts

Most economic professionals agree that candlestick charting first appeared sometime after 1850. Although most of the credit for candlestick growth and charting goes to a renowned rice trader named Homma from the town of Sakata it's likely that his original ideas were modified and polished over many years of trading eventually resulting in the system of candlestick charting that is used today.

Formation is key in candlestick charts, and you must have a data set that consists of open, high, low and close values for each time period you want to display. The hollow section of the candlestick is called "the body" or "the real body". It has long thin lines both above and below the body which represent the high/low range. These are called either "shadows", "wicks" or "tails". The high is characterized by marking the top of the upper shadow while the low is marked by the bottom of the lower shadow.

If the stock closes at a higher price than when the market opened, a hollow candlestick is depicted with the bottom of the body signifying the opening price and the top showing the closing price. If the stock prices closes lower than when the market opened, a filled candlestick is drawn with the top of the body signifying the opening price and the bottom of the body showing the closing price.

Most people consider candlestick charts to be more appealing to the eye as well as being easier to interpret. Once you learn the many variations of candles in candlestick charts such as Marubozu, Spinning Tops, Doji and Hanging Man, you will be able to see at a glance what's happening in the stock market. Every candlestick allows for a quick understanding of price action so that an investor or trader can immediately see and compare the relationship between the open and close as well as the high and low. The most essential relationship which forms the core of the candlestick is the one between the open and close. Hollow candlesticks indicate a good time to buy whereas filled candlesticks opt for selling.

The one thing candlesticks do not offer is the sequence of events between the open and close, just the relationship between them. While the high and low are obvious and unchangeable, candlestick, just like bar charts, cannot tell you which came first.