What are Candlestick Charts?
March 16, 2017
Candlestick Charts are also well known by the name Japanese Candlestick Charts. This type of chart is used to represent financial data and its movements. Visual representation provided by the candlestick pattern is easy to understand for analysis and better decision making purpose.
While creating a candlestick chart data about the prices high, low, open and close are necessary for the financial purpose. High and low are presented by the lines. Stock can close when they have high or low value.
If a stock is closed with the low value then the opening value it is represented by filling the body of a chart. If it’s opposite than the body part of candlestick will not be shaded. The body of the candle chart can be shorter or longer in size. The longer candle there is it means that there is more movement in stock and the value could be increasing or decreasing depending if it’s shaded or unshaded. So if the body part is unshaded then its good time to buy the stock since it’s cheaper at that time. But if the body part is shaded then the price has increased its time to sell the stock and it will help financially.
Most used Candlestick Chart Patterns
- Shooting star
- Blending Candlesticks
Formation of Doji occurs when the open value and the close value equal to each other. It’s hard to determine if the stock should be sold or to buy more with Doji Chart Pattern. Doji pattern is of various types such as Long-legged Doji, Dragonfly Doji, Tombstone Doji and Gravestone Doji. When Harami pattern is shown in a chart it represents that on the first day of stock market. The pressure is high for both the sellers and buyers. It is used when each day the prices are going to be increasing. Hammer formation and shooting star formations are similar to each other but little bit of opposite kinds. The shooting star always points upwards while the hammer points downwards. But both provide information that helps in selling the stock.
The Blending candlesticks are formed with uniting of candles with each other so they are blended together. Basically, the pattern has more than one candle used in this candlestick pattern. With the blending candles the opening, closing and high and low values exist same as other types of patterns is representing. But with the blending of candlesticks pattern, it also requires the open value of first candle and close value of the last candle in blended candlesticks. Blended candles are represented by the visual representation of hammer, shooting star, and other candlestick patterns as well. In blending candlesticks there could be a use of more than just two candles in forming the pattern of blending candlesticks.
Candlesticks are being used for many years now. A way of representing financial movements is easier to understand with candlestick charts. Each candlestick in the chart only shows the change in movement of a single day. So each day in a month a new candle formation takes place on the chart to compare everyday stock market details. The method of using candlestick charts is easier and better way for anyone to use. With its visual representation, the chart helps make decisions of selling and buying stock easier.