Japanese Candlesticks were invented some 200 years ago to track the prices of rice. Today they are invaluable to tracking the prices in the stock market. What many people don’t know is that these Japanese candlesticks can reveal valuable information that may forecast future prices. They are used for day trading and investing by many investors all over the world.

So what does a candlestick look like?
Candlesticks look exactly like their names imply. They are similar to candlesticks, except that have a top and bottom wick.

A green (or white) candlestick implies that the close of the day was higher than the open of the day. This means that it was a bullish (prices increased) day. If the candlestick is red (or black), this implies that the closing price was less than the opening price. This is considered a bearish (prices decreased) day.

The “wicks” that are above and below the candlesticks are actually called shadows. The upper shadow is the area between the real body and the high of the day. The lower shadow is the area between the real body and the low of the day.

So what have we learned about Japanese Candlesticks?

1. The color of the candlestick- Indicates if the closing price was higher or lower than the opening price. This will show if the day was generally bullish or bearish.
2. The length of the real body- Indicates the difference in opening and closing price. This size of the real body can be used to forecast a reversal in price.
3. The length from the high of the day to the low of the day- Indicates the trading range of the day. By general rule, the more trading range, the more volatility throughout the day.

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