When you start developing interest in Technical analysis, Candlestick is among few of those tools one begins with. There are many different kinds of stock charts in use, but Japanese candlesticks are probably the most commonly used by experts all over the world. Experts in technical analysis say it wasn't like that, candlestick was not so popular in the west as it was in Japan, I guess we are just lucky to be born in this era of fast communication and learning across oceans.
This style of charting is considered to have its roots in the Edo-period rice markets of Japan. Historians estimate that they took their present form in the latter half of the Meiji period (late 1800s). Originally, they were just sticks drawn in red or black.
Time-frame plays a very important role in Candlesticks learning. In a daily chart a single green or red candle expresses price movements for a single day; in a weekly chart a single candle expresses price movements for an entire week. Some traders even use lower time frames for instance 5 minute charts or 60 minute charts.
The graph below shows different types of red & green daily candles.
Candlesticks are very similar to bar charts in many ways, but I find candlestick to be easier & quicker to read. The thick part of the candlestick is called the real body. It represents the range of the stock’s opening & closing. Thin lines above & below the real body are called shadows.
When colour of the real body is green it means the close of the session was higher than the open. If the real body is red it expresses that the close of the session was lower than the open. Shadow above the real body is known as the upper shadow & under the real body is called lower shadow. Top price of the upper shadow is the high of session & low price of the lower shadow is the low of the session.