japanese candlestick – Japanese candlesticks basics and use – Teaching analysis tutorial part 1: We have been planning to publish these educational articles for a long time. But we always gave up. This is because, unlike other tutorials that have reliable sources and less controversy over their content, stock, and stock market analysis articles such as technical analysis do not have a fixed reliable source and there is a lot of disagreement over its content.
We conduct these tutorials based on our personal experience and reliable resources. So if we left a point or made a mistake, we would be happy for you to share it with us.
In the first part of the technical analysis tutorial, we will look at the basics of this method. In other words, in this article, we will try to teach you the use, meaning, and shape of this diagram. So that we can use these diagrams in future articles without ambiguity. Join us.
how do japanese candlestick represent trading in specific time ? and what are their uses ?
Japanese candlesticks are a chart or graph to display the trading information of a stock over a specific period of time. The reason for this naming was because we seem to be showing the trades by putting together several candles (according to the shape of the chart like below). The number of candles depends on the time period associated with them. For example, if we want to check trades in an hour, if we set the interval of candlesticks as a quarter, we would have 4 candlesticks, and if we set a minute, we have 60 candlesticks. It is customary to choose intervals between a quarter and a day (not required).
A Japanese candle represents four things:
1- The lowest price in a period of time
2- The highest price in a period of time
3- Price at the beginning of the time period
4- Price at the end of the period
Now, what can be obtained by analyzing a candlestick? Before answering this question, we need to segment the diagram of a candlestick.
A candle is divided into 3 parts:
1- Body, which refers to the wider part of the candle
2- Top shadow or thread – which refers to the top line of the body
3- bottom Shadow or lower thread – which refers to the bottom line of the body
Note that none of the above is required. (Some sources say candles must have a body. But while it is very rare and impossible, if the start and end prices remain constant during the trading period, we do not have a body or its a very narrow horizontal line.)by Using this Information it can be easily concluded that, using the Japanese candlestick, one can conclude the profit or loss of a share in a period of time (it is enough to see that the final price is less or more than the starting price)
The amount of profit or loss is equal to the body. For this reason, the amount of profit or loss obtained in a period of time can be obtained.
The presence or absence of resistance in a period of time can be obtained, if there is a shadow or thread, ie the price has gone up or down to that extent (maximum or minimum value), but as a result of the resistance made up or down shadow has emerged.
Types of Japanese candlesticks
BullCandle or ascending or bullish: The closing price is higher than the starting price.
Bear candle or descending or bearish: The final price is lower or lower than the end price.
What are the differences between Japanese candlesticks and line charts?
It is easy to get the difference and application of Japanese candle chart with a line chart. In line chart, information other than the price at the end of trading can not be obtained, but in the Japanese candle chart, other useful information as mentioned before can be obtained. For this reason, candle is one of the most powerful tools in technical analysis.