| While there are many books written on Technical Indicators and Candlestick charts, I prefer one titled JAPANESE CANDLESTICK CHARTING TECHNIQUES by STEVEN NISON. A trader and king of the Rice Markets in Japan in the late 1700s, Munehisa Homma's (born in 1724) trading principles evolved into what is now known as the Japanese Candlestick methodology. MANY different patterns are known by names such as Hammer, Hanging-man, Engulfing pattern, Dark-cloud, Piercing pattern, Morning and Evening Stars, Doji, Windows, Tweezers, Black Crows, Three Soldiers, Dumplings, Gravestone, Tri-star, Springs, Fry-pan, and on and on and on. |
| Keep in mind, a candlestick, as with any kind of chart, can be a day, a week, a month, a year, 15 minutes, or any other period of time. The chart reader must make certain that they understand how much time a candlestick is illustrating. |
| To read a candlestick, (reference the image above ) the lowest point for the stick is in deed the LOW of the time period which the candlestick is representing, and the highest point is likewise the HIGH for that period. If there is a narrow little line coming out of the top or bottom of the candlestick, it is know as the WICK. It is only visible when the high or the low are outside of the BODY. |
| The wider portion of the candlestick is known as the BODY. It is defined by the distance between the OPEN and the CLOSE of the time period. |
| If the period CLOSES with a value HIGHER than the OPEN, then the body is light in color and is indicating a BULLISH move. Whereas if the period CLOSES with a value LOWER than the OPEN, then the body is colored in to appear darker and is indicating a BEARISH move. |