Japanese candlesticks are considered one of the most important tools for technical analysis in today's financial markets, used by millions of traders around the world to understand price movements and predict market direction. However, only a few know the true story behind this tool and why it is named so oddly.

🏯 The beginning in Japan

The roots of Japanese candlesticks date back to the 18th century in Japan, specifically to the city of Sakata, where one of the most famous rice traders in history, Munehisa Homma, lived.

He had a unique business intelligence, as he noticed that rice prices are not only affected by supply and demand but also by the psychological and emotional factors of traders, such as fear and greed.

He started recording daily rice prices in an innovative way that helped him understand market behavior, creating drawings that represented price movement throughout the day in a manner resembling real candles, with a body and wick, to clarify the difference between opening and closing prices and the highest and lowest prices.

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💡 The idea of candlestick drawing

The idea of Japanese candlesticks is based on representing price movement over a specific period of time:

• The body of the candle represents the difference between the opening and closing prices.

• The upper shadow symbolizes the highest price reached.

• The lower shadow indicates the lowest price recorded.

• The color of the candle expresses the market direction:

• If the candlestick is white or green, it means the price has risen (closing above the opening).

• If it is black or red, it indicates that the price has decreased (closing below the opening).

In this way, he was able to clearly see market sentiments through the candlesticks and determine whether traders were in a state of optimism or fear.

📜 Its transition to the Western world

The technique of Japanese candlesticks remained used in Japan only for many centuries, until American analyst Steve Nison came at the end of the twentieth century and began studying it in depth.

In 1991, he published his famous book 'Japanese Candlestick Charting Techniques,' which introduced this method to the Western world, becoming a foundation for all modern trading programs.

🔍 Reason for the name

Japanese candlesticks are named so because they resemble a real candle with a flame, and because they originated in Japan. The name combines both shape and source, becoming globally known by this unique name:

Japanese Candlesticks – Japanese Candlesticks

🌏 Its impact today

Today, Japanese candlesticks are considered one of the most important market languages, as they allow traders to read sentiments and trends and predict whether the price will continue to rise or begin to fall.

Interestingly, this simple tool, which was born from rice trading over 300 years ago, remains to this day the backbone of modern financial market analysis.