A black (or red) candle represents a price action with a lower closing price than the prior candle's close. Thus, the color of the candle represents the price movement relative to the prior period's close and the 'fill' (solid or hollow) of the candle represents the price direction of the period in isolation (solid for a higher open and lower close hollow for a lower open and a higher close).

If the asset closed lower than it opened, the body is solid or filled, with the opening price at the top and the closing price at the bottom. If the asset closed higher than it opened, the body is hollow or unfilled, with the opening price at the bottom of the body and the closing price at the top. The range is calculated by subtracting the low price from the high price. The price range is the distance between the top of the upper shadow and the bottom of the lower shadow moved through during the time frame of the candlestick. The body illustrates the opening and closing trades. Wicks illustrate the highest and lowest traded prices of an asset during the time interval represented. The area between the open and the close is called the real body, price excursions above and below the real body are shadows (also called wicks). As will be seen later, when I discuss the evolution of the candle charts, it was more likely that candle charts were developed in the early part of the Meiji period in Japan (in the late 1800s). However, based on my research, it is unlikely that Homma used candle charts. They are often used today in stock analysis along with other analytical tools such as Fibonacci analysis. They were introduced to the Western world by Steve Nison in his book Japanese Candlestick Charting Techniques, first published in 1991. History Ĭandlestick charts are thought to have been developed in the 18th century by Munehisa Homma, a Japanese rice trader. They are visually similar to box plots, though box plots show different information. They are used by traders to determine possible price movement based on past patterns, and who use the opening price, closing price, high and low of that time period.

Candlestick chart of EUR/USD currency pair on daily timeframe in MetaTrader 5 trading platform.Ĭandlestick charts are most often used in technical analysis of equity and currency price patterns.

Candlestick pattern book by steve nison