Candles have served humanity as a source of light (and sometimes fragrance) for centuries, since their invention. In financial markets, their purpose can be said to be similar; they illuminate the path of asset prices and can help traders discover the sweet scent of profits. Japanese candles provide comprehensive information about prices at any given time. While line charts represent a smooth line of closing prices, Japanese candles show the opening, closing, high, and low prices for any time period. The opening and closing prices are represented by the body of the Japanese candle, while the extreme prices (highs and lows) are represented by the wicks. A candle is usually colored green if the closing price is higher than the opening price; and red, if the closing price is lower than the opening price.
Given the amount of information they provide, Japanese candles form the basis of technical analysis. The size and shape of the candle indicate significant price movement. Therefore, traders look for Japanese candle patterns when trading. A Japanese candle pattern can be a single candle or a series of multiple Japanese candles, which give a comprehensive picture of market sentiment. Depending on where they form on the chart, Japanese candle patterns help traders understand the movement of the underlying financial asset price to choose trading opportunities
