Diving Deeper into Japanese Candlestick Charts
Earlier, we gave you a brief introduction to Japanese candlestick analysis. Now, let’s take a closer look at how these candlesticks work and why they’re so useful in trading.
A Quick Refresher on Japanese Candlesticks
Believe it or not, the origins of candlestick charting go all the way back to 18th-century Japan, where traders used it to analyze rice prices—yes, rice!
Even back then, trading was serious business. If you wanted to live large, you traded rice like a boss. 💹
Fast forward to modern times, a Westerner named Steve Nison discovered this ancient charting method through a Japanese broker. He became fascinated with the technique, researched it deeply, and eventually introduced it to the Western trading world through his books and seminars.
Without Steve Nison, candlestick charts might’ve remained a hidden gem. Today, he’s widely regarded as the one who brought this powerful tool to global attention—earning him the nickname Mr. Candlestick.
What Are Japanese Candlesticks?
The easiest way to understand candlesticks is to look at their structure:
![Japanese Candlestick Anatomy]
Each candlestick represents a chosen time period—this could be a day, an hour, 30 minutes, or any interval you prefer. The candlestick summarizes the price movement during that time.
Each candlestick is made up of:
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Open: The price at the beginning of the time period
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Close: The price at the end of the time period
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High: The highest price reached
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Low: The lowest price reached
Here’s how to interpret them:
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If the close is higher than the open, the candlestick is typically hollow or white—indicating bullish momentum.
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If the close is lower than the open, the candlestick is filled or black—indicating bearish momentum.
The colored section of the candlestick is called the “real body”, while the thin lines above and below are called “shadows” or “wicks”.
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The upper shadow shows the high of the session.
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The lower shadow shows the low of the session.
Candlesticks provide a quick visual cue of market sentiment, making them one of the most popular charting methods among traders worldwide.