The upper shadow is the price distance between the top of the body and the high for the trading period.

They provide a graphical representation of the supply and demand behind each time period’s price action.Įach candlestick includes a central portion that shows the distance between the open and the close of the security being traded, the area referred to as the body. Japanese Candlesticks provide more detailed and accurate information about price movements, as compared to bar charts. American technical analyst Steve Nison introduced the technique to the West through his book “Japanese Candlestick Charting Technique.” Japanese Candlestick charting is now a popular technical indicator that traders use to analyze financial markets. When the Japanese stock market began in the 1870s, local technical analysts incorporated Homma’s candlestick methodology into the trading process. Traders can use the candlesticks to identify patterns of price action and make decisions based on the short-term direction of the prices.Īs a legendary rice trader of financial instruments, Homma dominated the rice markets and became popular for discovering the candlestick charting method. Homma developed candlesticks that graphically displayed the nature of price movements by using different colors to denote the differences.

During routine trading, Homma discovered that the rice market was influenced by the emotions of traders, while still acknowledging the effect of demand and supply on the price of rice. The concept of candlestick charting was developed by Munehisa Homma, a Japanese rice trader. Japanese Candlesticks are a technical analysis tool that traders use to chart and analyze the price movement of securities.

Updated MaWhat is a Japanese Candlestick?

Candlestick charting basics steve nison