What are Japanese Candlesticks?
A Japanese Candlestick is a price plotting technique that offers a quick and easy method of identifiyin the price movement of a currency pair. This "at-a-glance" technique has been used in Japanese for hundreds of years and has only recently come to the West. Most Forex traders use candlesticks for price predictions because it quickly shows the strength and action of the bulls and bears over the price of a currency pair.
There are actually two ways to use Japanese candlesticks. The first way is to read the display of data in the individual candlestick. The second method is to the pattern identification process of using candlesticks in particular combinations. This tutorial focuses only on the information obtained from an individual candlestick. You will see that an individual candlestick provides a huge amount of useful information to the Forex trader.
Parts of a Japanese Candlestick
The Body is the thick part of the candlestick. It represents the range between the periods opening and closing prices. The positions of the opening and closing prices will change depending on whether the period was bullish or bearish. If the body is white or clear, the currency pair experienced a bullish period. If the body is black or filled, the currency pair experienced a bearish period. The length and width of the body will change every trading period.
The Shadows are the thin lines above and below the body. They represent the high and low prices for the period. The length of shadows will change every trading period. Sometimes there will not be any shadows. Other times, there may not be a shadow above or a shadow below the body.