Japanese Candlestick Charts

Candlestick charting has become the most favored and widely used form of stock price charting over the last few years, and with good reason. Candlesticks give you an advantage by allowing you to quickly identify changes in supply and demand through candlestick formations or candlestick patterns. Before jumping into Japanese candlestick trading patterns lets take a look at how Japanese candlesticks are formed.

A candlestick is made up of three parts, an upper shadow, a lower shadow, and a real body. The highest point of the upper shadow represents the high. The lowest point of the lower shadow represnts the low. If the stock closes higher than its opening price, a white candlestick is drawn with the bottom of the real body representing the opening price and the top of the real body representing the closing price. If the stock closes lower than its opening price, a black candlestick is drawn with the top of the real body representing the opening price and the bottom of the real body representing the closing price. See the diagram below.

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