▶Japanese Candles for Beginners:
Japanese candles are part of any technical analysis. That's why I bring you an essential guide that you can use to start understanding all the elements that make up Japanese candles and the interpretation of the battle between buyers and sellers within the context of price.
According to Investopedia, a Japanese candle is the graphical representation of the price quote of an asset in a specific time frame. A Japanese candle indicates 4 things: opening price, minimum, maximum, and closing price.
If we have a time frame of 5 minutes, each candle represents the movement or variation of the price during those 5 minutes. The candle is green if the closing price is above the opening price.
On the other hand, a candle is red if the closing price is below the opening price. The body of the candle indicates how much variation the price suffered during that time period.
The lower and upper shadows mean that the price was moving at that price but retreated. These shadows are also known as upper tails or lower tails.
Many traders use Japanese candle charts to determine the possible price movement based on previous patterns. Japanese candles are useful as they show four price points (opening, closing, maximum, and minimum) over the time period you choose in a charting tool. Many algorithms are based on the same price information shown in Japanese candle charts. The price movement of a security is largely dictated by the emotions of the traders, and this can be read in Japanese candle charts.
Next, the parts of the Japanese candle: