The Japanese Candlestick originally evolved from Japan & was used in analyzing rice trading. Steve Nison, a westerner, learned the secret technique of interpreting the chart from his Japanese fellow, studied the concept and came up with a powerful tool which is now known as the candlestick charting.

The candlestick chart is known as so because the patterns are similar with the line of candles, attracted traders from every sectors; from institutional power players to individual part-timers. Now you’d say why? Because it was reliable, the knowledge was easy to use and interpret following fewer risks with increased profit.

Candlesticks are formed using the open, high, low and close.

>> If the close is above the open, then a hollow candlestick (normally displayed as white) is drawn.

>> If the close is below the open, then a filled candlestick (normally displayed as black) is drawn.

>> The hollow or filled section of the candlestick is called the “real body” or actual body.

>> The thin lines poking above and below the body display the high or low range and are called shadows.

>> The top of the upper shadow is the “high.”

>> The bottom of the lower shadow is the “low.””

Buying and selling is indicated by the long bodies. The selling or buying pressure depends upon the length of the body. The more the length, the more the selling/buying pressure.

Very little buying or selling activity is denoted by short bodies. In the forex system, the term buying and selling are represented by bulling and bearing respectively.

The session high is represented by upper shadows.

The session low is represented by the lower shadows.

Why should you use candlestick charting?

A question comes here, when there are 100s and 1000s of trend indicators are available, then why use candlestick charting? Yes, though there are several trend indicators, but it has its own specialty:-

1. It is easy to interpret and understand. It is similar to the bar chart; the beginners as well as the intermediates can know about the trading movement in candlestick analysis.
2. It gives you the information on change of the market trend. It is  a powerful tool helping you understand market turning points. Unlike the traditional bar chart, you can see the reversal signals of forex market after a few sessions.
3. It gives you unique market insight. You just can’t only see the moving market trend but also the force that’s underpinning the move in the market.
4. Western charting analysis is much more improved by the Candlestick analysis. It is highly compatible to any of the present Western technical tools or software used in market analysis.
5. It is easy to synergize the common bar chart with the candlestick chart, along with the traditional market indicators. Candlestick charts are the best means of spotting good opportunities and sorting out time trades with other indicator types.
6. Also charting indicator describes you about the market momentum.