What are Japanese Candles?
Japanese candles are a tool used to analyze price movements in financial markets. Their origin comes from Japan, where they were first used to track prices in the rice market. Today, they are very popular among traders and analysts because they offer a visual and clear way to understand what is happening with an asset.
What do they look like and what information do they provide?
Imagine a candle with a wick at each end. Each "Japanese candle" represents a period of time (it can be a day, an hour, etc.) and is composed of the following elements:
Body: It is the widest part of the candle. It indicates the opening and closing price during that period. If the body is green or white, it means that the price went up. If it is red or black, it means it went down. Wicks or shadows: These are the lines that extend above and below. They represent the maximum and minimum price reached during that time.
Why are they useful?
Japanese candles allow you to quickly see if the market is rising or falling, and they also show signals that help predict possible changes in trend. For example, if a candle has a long wick pointing down, it could indicate that buyers are entering the market and the price might rise.
A simple example
Suppose you are watching the price of a stock during a day. If the candle shows a green body with a small upper wick, it means that the price rose steadily and ended close to its highest point for that day. That information can help you understand the behavior of buyers and sellers of that stock.
Summary
Japanese candles are like a visual map of prices in the markets. With a little practice, they will help you analyze trends and make more informed decisions when investing. They are a key tool if you are interested in understanding the world of financial markets.