Human beings have been actively involved in the trading of goods and services since the beginning of time.

Trading has undergone so many stages of evolution and development over time which are responsible for the advanced trading practices that are prevalent today. Today, we are going to talk about the Japanese candlestick pattern. The Japanese candlestick chart pattern is believed to have been developed in the 18th century by a rice trader known as Munehisa Homma.

A candlestick is made of four parts which are “high, low, open, and close”. They are used to give a detailed description of a candlestick.

source

Open:

this shows the point where price movement started for the day; it can be up to or down depending on the trend of the candlestick.

Close:

this represents the particular point where the market stopped for the day; it can also be up or down depending on the trend of the candlestick.

High:

this is often in the region of the candlestick known as the shadow. The high signifies the highest price an asset reached within a timeframe. It can be seen as a frame of reference.

Low:

this is the lower shadow of a candlestick. This signifies the lowest point the price of an asset reached within a particular period of time.

The Candlestick chart system has really turned trading around. It has really revolutionized trading. The parts of a candlestick allow for the stress-free analysis of complex charts that would have otherwise been nearly insurmountable.

Why is it the most widely used chart system?

Everybody wants convenience. Everyone wants to get things done in an easy and efficient way as quick as possible, and the candlestick system does just that.

Conclusion

I hope we have all understood the invention of the Japanese candlestick chart system and why we are advised to use it in our trading activities. Using this system ensures that profit is maximized during trading.

Assignment

1. Describe the Japanese Candlestick.
2. State 3 benefits of the candlestick chart pattern

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