Japanese candlestick price charts may seem daunting, so we made an easy guide to understanding them.
Body Positivity
Just as we all have varying body sizes, Japanese candlesticks are no different.
A long body indicates strong buying or selling with the longer the body the higher intensity of the buying or selling pressure. This reads as either the buyer or seller was stronger and took control.
On the other end, short bodies indicate lower buying or selling activity.
A long white Japanese candlestick depicts strong buying pressure the longer it is the further the close is above the open.
This scenario would indicate prices increased dramatically from open to close and the buyers, or bulls, acted aggressively.
A long, black, and filled candlestick illustrates strong selling pressure. The longer the black Japanese candlestick is, the further the close is below the open.
This other scenario describes the prices having greatly fallen from the open and the sellers, or bears, acting aggressively. In this scenario, the bears “beat” the bulls, whereas in the previous scenario, the roles were reversed.
Grasping Shadows
The shadows on Japanese candlesticks, and lines above and below the bodies, tell you a lot about the trading session.
Simply stated, the upper shadow relates to the session high and the lower relates to the session low.
A long shadow indicates the trading action occurred well after the open and close, whereas a short shadow means the trading action happened mostly near the open and close.
A long upper shadow and short lower shadow translates to the buyers or bulls, bidding prices higher, but at some point, toward the end of the session, the sellers, or bears, drove prices back down to their open price.
Conversely, if the chart depicts a shorter upper shadow and long lower shadow, this indicates the bears brought down the price, but, towards the end of the session, the bulls brought the prices back up near the open price.
Disclaimer: All information provided here is intended solely for study purposes related to trading financial markets and does not serve in any way as a specific investment recommendation, business recommendation, investment opportunity, analysis, or similar general recommendation regarding the trading of investment instruments. The content, in its entirety or parts, is the sole opinion of SurgeTrader and is intended for educational purposes only. The historical results and/or track record does not imply that the same progress is replicable and does not guarantee profits or future profitable trading records or any promises whatsoever. Trading in financial markets is a high-risk activity and it is advised not to risk more than one can afford to lose.
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