INTRODUCTION TO CANDLE CHART - PRAT ONE

Introduction to candlesticks

Candle Sticks analysis was developed by Japanese in 17th Century to trade rice. For a candlestick chart, the open, high, low and close are all required. A daily candlestick is based on the open price, the intraday high and low, and the close. candlestick charts have become quite popular in recent years because :
 It is easy to understand
 Provide earlier indications of market turns so it will help us to enter & exit the market with better timing.
 Reading candle chart with other indicators give us a better understanding about the market condition.

CONSTRUCTION OF CANDLE STICKS
In order to create a candlestick chart, you must have a data set that contains open, high, low and close values for each time period you want to display. The hollow or filled portion of the candlestick is called "the body". The long thin lines above and below the body represent the high/low range and are called "shadows". If the close is lower than the open the real body is black. The real body is white if the close is higher than the open. The real body is white if the close is higher than the open. The thin lines above and below the real body are called the shadows. The peak of the upper shadow is the high of the session and the bottom of the lower shadow is the low of the session. The color and length of the real body reveals whether the bulls or the bears are in charge



In General , the longer the body is, the more intense will be pressure on buying and selling and in contradiction to it ,short candlesticks indicates little price movement and represent consolidation.

SHADOWS OF CANDLESTICKS
Candlesticks with a long upper shadow and short lower shadow indicates that buyers dominated during the session, and bid prices higher. However, sellers later forced prices down from their highs, and the weak close created a long upper shadow. Conversely, candlesticks with long lower shadows and short upper shadows indicate that sellers dominated during the session and drove prices lower. However, buyers later resurfaced to bid prices higher by the end of the session and the strong close created a long lower shadow.

BULLS VERSUS BEARS
A candlestick depicts the battle between Bulls (buyers) and Bears (sellers) over a given period of time.



1.Long white candlesticks indicate that the Bulls controlled the ball (trading) for most of the game.
2.Long black candlesticks indicate that the Bears controlled the ball (trading) for most of the game.
3.Small candlesticks indicate that neither team could move the ball and prices finished about where they started.
4.A long lower shadow indicates that the Bears controlled the ball for part of the game, but lost control by the end and the Bulls made an impressive comeback.
5.A long upper shadow indicates that the Bulls controlled the ball for part of the game, but lost control by the end and the Bears made an impressive comeback.
6.A long upper and lower shadow indicates that the both the Bears and the Bulls had their moments during the game, but neither could put the other away, resulting in a standoff.



We will discuss some other important types of Candle Sticks in next blog.