Candlestick Stock Chart Analysis – Introduction
Candlestick stock analysis techniques were first introduced in Japan in 17th century by a Japanese man called Munehisa Homma. He was a trader in futures and he observed that there is a link between price of a stock and the value but the market as strongly influenced by the emotions and sentiments. These types of charts came in picture much before the Americans started using bar charts and point and figure analysis charts. The principles established by Homma are the basis for the candlestick chart analysis, which is used to measure market emotions towards a stock.
Candlestick stock analysis technique has become very popular among the traders and analysts. Since this is just a short term analysis tool it covers the stock for only 8 – 10 trading sessions. Candlestick charts are often very complex and pretty difficult to understand. We will have a series of articles on candlestick techniques and we will try to cover as much as we can about this technique.
Components of a candlestick:
Candlestick looks somewhat similar to a bar in bar chart but that’s where the similarity ends. Sometimes the people who study bar charts get confused when they look at a candlestick chart since candlesticks look like bars but the charted in a different way. A candlestick has 3 parts; there is a wide part which is called real body of the candlestick and then there are two lines on either side of the real body which are called shadows. 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. The shadows are sometimes called the wicks of the candle. The high is marked by the top of the upper shadow and the low by the bottom of the lower shadow. Real bodies can be either long or short and either black or white. Shadows can also be either long or short.
Candlestick components
How do candle charts compare with bar charting?
The biggest difference between a candlestick chart and a bar chart is that a candle stick chart give information about the opening price as well as closing price of a stock on the same trading day while the bar charts only charts the closing prices between yesterday and today. The reason is that Americans put more emphasis on the closing price of a stock while Japanese think it is important to consider both opening as well as closing price on the same day.
If you see a candlestick chart and a bar chart of a same stock for the same period, you will notice the vast amount of difference in information between these two charts.
Candlestick vs Bar chart compare
In following articles we would cover about:
- Candlestick chart patterns
- Candlestick pattern analysis
- Candlestick support and resistance
Related posts:
- Candlestick Stock Analysis – Patterns
- Technical analysis of stocks
- Swing Trading – Introduction to Swing Trading Basics
- Stock Analysis for beginners – Stock Analysis Techniques
- Reading stock charts for dummies
Filed Under Stock Analysis, Stock Market Analysis, Stock Market Basics, stock market for beginners | Leave a Comment
Tagged With bar charts, Candlestick chart patterns, Candlestick charts, candlestick components, Candlestick pattern analysis, candlestick stock analysis, candlestick technical analysis, cansdlestick analysis
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