Japanese candlesticksJapanese candlesticks are a way of showing information on a... More are a way of showing information on a price chart over a set period of time. Japanese candlestick charts are a type of OHLC chart.
To learn more about Japanese candlesticks, we recommend our learning module:
Reading a candle
Depending on the time frame of the chart, each candle represents a time period of a specific length, except for the most recent, unfinished candle.
Example: on a 5-minute candlestick chart, each candle represents a five minute period. On a 1-hour candlestick chart, each candle represents a one hour period.
Candlesticks are visualised in the form of a rectangleA rectangle is a chart pattern displayed by the price that u... More (the “body”), with a vertical line on both the top and bottom (the “wicks”).
Each candlestick shows the following:
- The opening priceWhat are value stocks? A value company is a company that app... More (the priceWhat is price? The price is the measure of the value of good... More at the beginning of the time period)
- The closing price (the price at the end of the time period)
- The highest price reached during that period
- The lowest price reached during that period
Candle colours
Candlesticks are represented by two different colours depending on if they are bullish (the closing price was higher than the opening price) or bearish (the closing price was lower than the opening price).
The different body colours help us to quickly tell if the candlestick is bullish or bearish and can be set to any colour.
In many trading books, you are likely to see white (bullish) and black (bearish) candles. This is because it fits into the practice of black and white book printing. Do not let different colourings confuse you, it does not matter what colour your candlesticks are; there are only bearish and bullish candles.
