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Candlestick Charts

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Candlestick charts plot stock price data. Originated by Japanese rice merchants, candlestick charts are used both to identify price patterns and construct trend lines. Candlestick charts use the opening, high, low, and close price data for a specific period, usually days. Pictorially, candlestick charts have a "real body," a rectangular vertical box that connects the opening and closing prices. Candlestick charts also have "shadows" or wicks," which extend from the rectangles to show the extreme highs and lows. If the closing price is above the opening, the real body is plotted in white. When the price closes below the opening, the candlestick chart is plotted in black. Candlestick charts provide essentially the same information as the more familiar bar charts. But some analysts prefer candlestick charts because they are more visually compelling, making it easier to identify various characteristics of stock price action. Like bar charts, the formations of candlestick charts are assigned various names, such as hanging man (kubitsuri) and hammer (takuri). Candlestick charts are also known as candle charts.



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