| Bearish Patterns
CLICK A PATTERN FOR A DETAILED LOOK
You may be asking
yourself, "If I can already use bar charts to view prices, then why do I
need another type of chart?"
The answer to this
question may not seem obvious, but after going through the following
candlestick chart explanations and examples, you will surely see value
in the different perspective candlesticks bring to the table. In my
opinion, they are much more visually appealing, and convey the price
information in a quicker, easier manner.
What is the History of
Candlestick Charts?
Candlestick charts are on
record as being the oldest type of charts used for price prediction.
They date back to the 1700's, when they were used for predicting rice
prices. In fact, during this era in Japan, Munehisa Homma become a
legendary rice trader and gained a huge fortune using candlestick
analysis. He is said to have executed over 100 consecutive winning
trades!
The candlesticks
themselves and the formations they shape were give colorful names by the
Japanese traders. Due in part to the military environment of the
Japanese feudal system during this era, candlestick formations developed
names such as "counter attack lines" and the "advancing three soldiers".
Just as skill, strategy, and psychology are important in battle, so too
are they important elements when in the midst of trading battle.
What do Candlesticks
Look Like?
Candlestick charts are
much more visually appealing than a standard two-dimensional bar chart.
As in a standard bar chart, there are four elements necessary to
construct a candlestick chart, the OPEN, HIGH, LOW and CLOSING price for
a given time period. Below are examples of candlesticks and a definition
for each candlestick component:
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