Japanese Candlesticks are a fundamental tool in technical analysis used to represent price movements in financial markets such as stocks, currencies, and commodities. Their origins date back to Japan in the 18th century, where they were used by rice traders, and they later spread globally thanks to Steve Nison.
### Components of a single candle:
1. Body (Real Body):
- Represents the difference between the opening and closing price over a time period (minute, hour, day...).
- If the close is higher than the open: the body is green or white (bullish candle).
- If the close is lower than the open: the body is red or black (bearish candle).
2. Wicks (Shadows):
- The long lines above or below the body represent the highest price (upper shadow) and the lowest price (lower shadow) during the period.
### Importance of Japanese Candlesticks:
- Helps in determining the market direction (bullish/bearish/sideways).
- Reveal reversal or continuation points through specific patterns (such as: hammer, hanging man, shooting star, three soldiers...).
- Provides information about the size of fluctuations and selling or buying pressure.
### Example of a common candle pattern:
- Hammer Candle: long lower shadow and small body, indicating a bullish reversal after a decline.
In short, Japanese candlesticks are a visual language for quickly understanding market movements and making informed trading decisions.
