Candlesticks, sometimes referred to as Japanese candlesticks, are a type of financial chart used primarily in technical analysis. Candlestick charts display the open, close, high and low prices of an asset over a given time period. They provide traders with valuable information that can be used to make informed trading decisions.
The most basic type of candlestick consists of two parts: the body and the wick or shadow. The body is represented by either a filled box (for bearish candles) or an empty box (for bullish candles). The top and bottom edges indicate the high and low price points during the period shown on the chart. The “wick” or “shadow” indicates any price movements outside these boundaries. A long upper shadow indicates resistance at higher levels while a long lower shadow suggests support at lower levels.
In addition to these basic components, there are several other types of candlesticks that are used for different purposes such as reversal patterns, continuation patterns and trend confirmation signals. Reversal pattern candlesticks signal potential reversals in market direction which may prompt traders to exit their positions before they become losses; continuation patterns signal potential continuations in current trends which may help traders stay in profitable positions; trend confirmation signals like Doji stars let traders know when momentum is shifting from one side of the market to another so they can adjust their strategy accordingly.
Overall using Candlestick charts offer many benefits over traditional bar charts including greater clarity on how prices have moved throughout each time frame making it easier for investors to identify key areas where buying/selling pressure has been present or absent as well as providing insight into future price movements relative to current ones allowing them take advantage of potentially profitable opportunities sooner than later!
