Many people start investing in the stock market without learning anything but by the time they realize that it is impossible to make profits without learning, they have already suffered huge losses.
Stock market is a field which is as deep as the ocean and it takes a lot of hard work to learn it. Years of experience is required.
There are many instruments available to invest money in the stock market like equities, futures and options, mutual funds, bonds etc. There are many strategies, techniques, indicators used but the important thing is where to start?
Just like education of small children starts with A, B, C, D, learning in stock market also starts with price action.
The most important thing to understand the price is the candlestick chart. So let’s understand in detail what is a candlestick chart?
Table of Contents
What is a Candlestick Chart?
In the context of the stock market, a candlestick chart is a graphical presentation used to depict price movements in financial analysis. It is widely popular for depicting price movements. Option traders are well aware of this.
Candlestick charts are very helpful for analysts and traders to quickly understand trading trends and patterns. Traders make trading decisions based on the patterns formed on candlestick charts, which help forecast the short-term direction of the price.
Candlesticks actually show four price points (open, close, high and low) during a specified period. Finally, candlesticks are a charting tool used in technical analysis. This tool provides information in graphical form.
A Brief History of Candlesticks
Candlesticks are an important tool with roots in Japan that has become a popular way to view price changes and market patterns. It is said that it was invented by Munehisa Homma, a rice trader in the 18th century. In fact it was developed to analyze the price patterns of rice in commodity markets.
Over time this technique was refined and today it has become an integral part of technical analysis.
A book on candlestick charting technique was written by an author named Steve Nison in 1991 which introduced this technique to people in other countries.
The four main elements of candle
Open, high, low and close prices are the four main elements that make up each candle. After a candlestick is complete, it is usually divided into two parts, the real body and the shadow, also known as the wick.
What Is a Candlestick Pattern?
I will give you detailed information about Candlestick Pattern in my next blog, here I am giving some information about it in brief.
Candlesticks are used to predict the future direction of price movement. Some people believe that it can help identify a repeating pattern of a particular market movement.
Here is the list of – Top 10 candlestick patterns.
Top 10 candlestick patterns
The most common candlestick pattern used by many traders.
- Hammer
- Inverted hammer
- Morning star
- Three white soldiers
- Bearish engulfing
- Bullish engulfing
- Hanging man
- Three black crows
- Shooting star
- Evening star
Final words,
It is true that candlestick charts are one of the most popular components of technical analysis, but trading based solely on them can be risky. As I told you earlier that it is as deep as the ocean and it takes a lot of hard work to learn it.
Always remember this when you are going to invest your hard earned money in it!
