A candlestick is defined as a price chart that demonstrates the high, low, and close for a security each day over a specified period of time. To be more specific, it is the method of technical analysis charting, that adds measurement and colour to the Bar chart by illustrating the area of the bar between the open and close as a two dimensional real body.

The Japanese Candlestick reflects the change in price in relation to time. Every time we look at a diagram, we have to choose the time period within which we wish to observe price changes over time.

During the 18th century, a Japanese business man Munehisa Homma, also known as Sakata, shaped a technical analysis method to analyse the price of rice agreement. What Sakata did was to keep records of the market psychology in order to learn how to increase his profits by closely monitoring the prices and eventually help him to make better choices in his trades.

Today Sakata is considered to be the ‘Grandfather’ of candlesticks. In 1989, Steve Nilson, introduced the candlestick charting to the Western world from Japan. He published his first article on candlestick analysis in Futures Magazine..

The body of the candlestick is called ‘Real Body’ and symbolizes the range between the opening and closing prices. When the Real Body is filled-in, it represents that the ‘close’ during that period of time was lower than the ‘open’, meaning that the ‘close’ was higher than the ‘open’ (bullish). The thin vertical line attached on the Real Body is called the upper/lower shadow, representing the high/low ends for that period.

Description

Candelestic Indicators

Abandoned Baby
Belt Hold
Breakaway
Concealing Baby Swallow
Doji Star
Dragonfly Doji
Engulfing
Gravestone Doji

History

What are the Japanese Candlesticks

Hammer
Harami
Harami Cross
Homing Pigeon
Inverted Hammer
Kicking
Ladder Bottom
Mat Hold
Matching Low

Matching Low
Meeting Lines
Morning Doji Star
Morning Star
Piercing Line
Rising Three Methods
Separating Lines
Side By Side White Lines

Stick Sandwich
Three Inside Up
Three Line Strike
Three Outside Up
Three Stars In The South
Three White Soldiers
Tri Star
Unique Three River Bottom
Upside Gap Three Methods
Upside Tasuki Gap

Bullish Indicators

Bearish Indicators

Abandoned Baby
Advance Block
Belt Hold
Breakaway
Dark Cloud Cover
Deliberation
Downside Gap Three Methods
Downside Tasuki Gap

Doji Star
Dragonfly Doji
Engulfing
Evening Doji Star
Evening Star
Falling Three Methods
Gravestone Doji
Hanging Man
Harami

Harami Cross
Identical Three Crows
In Neck
Kicking
Meeting Lines
On Neck
Separating Lines
Shooting Star

Side By Side White Lines
Three Black Crows
Three Inside Down
Three Line Strike
Three Outside Down
Thrusting
Tri Star
Two Crows
Upside Gap Two Crows

Resources

Books

1. Steve Nison (2001), Japanese Candlestick Charting Techniques, Second Edition, Prentice Hall Pr.

2. G. L. Morris, R. Litchfield (2006), Candlestick Charting Explained: Timeless Techniques for Trading Stocks And Futures, McGraw-Hill Professional

Other sources

WORCESTER POLYTECHNIC INSTITUTE (2011), Automated Foreign Exchange Trading System, An Interactive Qualifying Project Report

TradeStation. (2002-2007). Getting Started With Forex Trading: A Forex Primer. Retrieved April 30, 2011, from TradeStation: https://www.tradestation.com/support/books/pdf/introduction_to_forex_trading.pdf