Written by Robert McKinley

Introduction to Japanese Candlesticks

If you are not familiar with the three types of Forex charts, you should read about them here before you continue.

Candlestick Charting

Candlestick charting as a tool for technical analysis was invented by the Japanese a very long time ago. They used it for trading rice. Thanks to a man by the name of Steve Nison, it was introduced to the Western world and it has gained popularity ever since.

The anatomy of a candlestick

As you can see in the above example, candlesticks indicate price points for the open, high, low and close.

• If, as seen in the candlestick on the left, the closing price is above the opening price, a hollow (white) “real body” (or just “body”) is automatically drawn by the charting software.
• If, as seen in the candlestick on the right, the closing price is below the opening price, a filled-in (usually black) “body” is automatically drawn by the charting software.
• The vertical lines that extend above and below the body indicate the high/low range, respectively, and are called shadows.
• The very top of the upper shadow indicates the highest price point.
• The very bottom of the lower shadow indicates the lowest price point.

The next lesson is Candlestick Trading.