Japanese Candle Charts

Over 100 years before traditional bar charts were developed, the Japanese were using Candlestick charts to analyze the rice market. The thick part of the candlestick is called the "real body" and represents the range between open and close. When the real body is solid it means the close was lower than the open, if the real body is white, it means the close was higher than the open. The thin lines above and below the real body are called "shadows" and they represent the high and low of the day. If the open and close are the same, the display will appear like a traditional bar. These are called "doji" lines.

The Japanese look for patterns that are formed by the last two or three candles which indicate continuation or reversal of recent trend. Many of these patterns can be defined mathematically making it possible for today's charting programs to spot the patterns for the chartist.

 

Example of Harami candle pattern

Daily candle chart of Newmont Mining showing a Harami candle pattern.
Chart created using Personal Analyst from Trendsetter Software.


Personal Analyst, Personal Hotline and Pro Analyst can identify 26 key candle patterns including:

Hammer, Hanging Man; Bullish & Bearish Engulfing; Piercing Pattern; Dark Cloud Cover; Morning, Evening Stars and Doji Stars; Inverted Hammer; Shooting Star; Upside Gap Two Crows; Harami & Harami Cross; Three Black Crows; Bullish & Bearish Counterattacks; Bullish & Bearish Beltholds; Tri Star Bottoms & Tri Star Tops; Dojis

Candles that identify patterns are "painted" in offsetting colors. Hold the mouse down on any of these candles to read a description of the pattern and its meaning. Page numbers are a reference to Steve Nison's book on Candlestick interpretation.

 

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