There are many types of price charts, such as the line chart, bar chart, point and figure chart, candlestick chart, range bar, and Renko chart, but since its introduction to the Western world by Steve Nison, the candlestick chart has become one of the most popular and widely preferred methods of charting price action.The candlestick chart provides a lot of useful information about what price has done within the specified timeframe.And with its color coding and visible shapes and patterns, you can easily see whats happening in the market at a glance.
Later on, in 1991, he wrote a book about this new charting method he learned from Japan and titled it, Japanese Candlestick Charting Techniques. According to him, candlestick charting techniques originated in Japan in the 18 th century. He traced the origin to a Japanese rice businessman, Munehisa Homma, who was trading rice in the city of Sakata. Although hes the youngest, he was allowed to do so because of his exceptional trading ability. It was during this period, while trading in Sakata, Osaka, and Edo (present-day Tokyo) rice exchanges, that he developed a technique for tracking the price of rice coupons. Munehisa noticed that the daily variations in the prices of these rice coupons were not only as a result of fundamental factors like weather, stock volumes, and harvest but also as a result of traders sentiments. He then developed a way to track traders sentiments by charting price movement. But, according to Steve Nison, the technique wouldnt become popular until the 1850s when more rice traders started using it. Typically, a positive candlestick is green or white, whereas a negative candlestick is red or black. As a trader, you can choose any color you want to represent a bullish candlestick, but white or green is normally used to indicate a bullish direction. The upper wick lies between the periods high and close price while the lower wick lies between the periods low and open price. You can represent a bearish candlestick with any color you want, but black or red is usually the color of choice for a bearish candlestick. The upper wick lies between the periods high and open prices while the lower wick lies between the sessions low and close prices. There are many reasons why it has gained such acceptance among traders, and here are some of them. The colored bodies of the candlesticks make them easily visible, so a trader can see the price direction at once. Some examples that we will cover later include the hammer, shooting star, hanging man, marubozu, doji, and spinning top. In fact, some price action traders rely heavily on these patterns in their technical analysis. The most important thing is to understand how candlesticks mirror market behavior and make it easier to see what the market is doing. Candlestick Chart Patterns How To Read CandlesticksHere are some tips on how to read candlesticks without memorizing patterns one by one. On the other hand, if its nearer to the low, the control lies with the bears. If you look at the bearish engulfing pattern or dark cloud cover, the closing price of the candle is near the low, so the bears are in charge.
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