Candle Stick Chart Patterns

The candlestick techniques we use today originated in Japan over 100 years before the West developed the bar charting systems that we are familiar with.

 

Candlestick Components

The basic daily candlestick line contains the market's open, high, low and close of a specific day. The wide part of the candlestick, which is called the "real body” represents the range between the open and close of that day's trading. When the real body is filled in or black it means the close was lower than the open. If the real body is empty, it means the opposite: the close was higher than the open.

Just above and below the real body are the "shadows". Chartists have always thought of these as the wicks of the candle, and it is the shadows that show the high and low prices of that day's trading. If the upper shadow on the filled-in body is short, it indicates that the open that day was closer to the high of the day. And a short upper shadow on a white or unfilled body dictates that the close was near the high. The relationship between the day's open, high, low, and close determine the look of the daily candlestick. Real bodies can be either long or short and either black or white. Shadows can also be either long or short. 

Patterns on the Bullish and Bearish Sides

In the world of Japanese candlesticks, there are a number of bullish and bearish patterns. With a short list on the bullish side of the market, a chartist would look for the following patterns: 'mat hold', 'rising three methods', 'separating three lines', 'side-by-side white lines', 'upside gap three methods', and 'upside Tasuki gap'. 

 
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