J A P A N E S E - C A N D L E S, Candlestick

Japanese Candles, Candlestick - kind of interval schedule and technical indicator is mainly used to display changes of exchange quotations of shares, commodity prices, etc...
Schedule type "candlestick" is also called the registration interval and line graph in the sense that each element reflects the price change within a certain range of time. It is most commonly used in the technical analysis of the market.

History 

Exchange of rice market in Japan acted from the XVII century. In accordance with the decisions of the Tokugawa Ёsimune (8th Shogun Tokugawa), which reformed the rice trade rules, in 1730 we began to operate the rice exchange - "Dojima" (Osaka), "Kuromae" (Tokyo). It is believed that the first time the chart as a sequence of "candles" invented rice trader Homma Munehisa to visualize the image of the price of maximum and minimum within a certain period of time, as well as the prices at the beginning and end of the period (opening price and closing price, respectively). Munehisa started its commercial activities in 1750, 20 years after the organization of exchanges."Japanese candles" are very popular due to the simplicity of presentation and ease of reading. Beginning from the XVII century, many have tried to create a variety of charts and graphs that would help to predict future market behavior. This method proved to be the most interesting, because it displays one item at once four indicators instead of one. Japanese rice traders quickly found that on the basis of the graphs can be a sufficient degree of probability to predict future demand and price behavior. This method is called Keisen (け い 線) is widely known in Japan, it is actually the description of a large number of models to predict the possible price movement.

Shape "candlestick"

"Candle" is composed of a black or white body and the upper / lower shadow (sometimes called a wick). Upper and lower limit of the shadow shows the maximum and minimum prices for the period. The boundaries of the body show the opening and closing price.

If prices rose as a whole, the body is white (not black in the colors phono-registration, or just bright, often green), the lower limit of the body represents the opening price, the top - the closing price. If prices fell, the body is black (filled, reverse colors phono-registration, or simply dark, often red), the upper limit of the body represents the opening price, the lower - the closing price.

 
In case of coincidence of prices of opening / closing with a maximum / minimum, appropriate shade, or even both at once shadows can not be. When a match is the opening and closing prices of the body can be.

The candle does not contain direct information on the movement of prices in the corresponding period of time. There is no indication that a maximum or minimum was reached first, the number of times there was an increase or decrease in prices. For example, if both the shadows can not be said, at first the price increased or decreased. To find out, it is necessary to study the charts of shorter time interval.

In some countries (eg, China) have traditionally used green candles for a rise in prices, and red - to decrease. 

Simple "candles" 

 There are many different types of candles. Below are the names and improbable assumptions for certain species.

- White candlestick - signals the upward movement (the longer the candle, the greater the difference in price) 

-  Black candlestick - signals the downward movement (the longer the candle, the greater the difference in price) 

-  A long lower shadow - signals a bull market (the length of the bottom shade should be no less a body than it is longer, the more reliable the signal) 

-  long upper shadow - signals a bear market (the length of the upper shadow should be no less a body than it is longer, the more reliable the signal)

-  Hammer - an important turn signal at the base . It has a small body (white or black), located at the top of the price range of the session, and a very long lower shadow; cut off the top of - a candle, in which there is no upper shadow (bullish signal during a recession and a bear during ascent); hanged - an important turn signal on top. The Hanged Man and hammer - it is, in fact, one and the same candle. It has a small body (white or black) at the top of the price range of the session, and a very long lower shadow. The upper shadow is small or non-existent. But if the candle appears when an upward trend, it becomes a bearish hanging. It shows that the market has become vulnerable, but requires a "bear" confirmation for the next session (in the form of a black candle with a lower closing price). As a rule, the lower shadow candle that must exceed two to three times body height.  

-  Inverted Hammer - turn signal at the base, however, be confirmed in the next session (the body can be black or white); truncated base - a reversal signal at the base, however, be confirmed in the next session (with no lower shadow); shooting star - candle with a long upper shadow, short lower shadow (or without it) and a small body near session lows, which appears after an upward trend. It is a bearish signal when rising trend 

-  White dreidel - a neutral figure, becomes important in combination with other candles 

-  Black top - a neutral figure, becomes important in combination with other candles 

-  Dodges (dojo doji) - opening and closing prices of the same (or almost same) becomes important in combination with other candles, but it is among the most important of candles. Furthermore, they are part of the important spark models. 

-  A long-legged doji - turn signal is on top when the two days open with a strong "breach" ( "gap") up and down, and the candle "hangs" on the schedule. If the opening price and closing long-legged doji are in the middle between the maximum and minimum, such a candle called a "rickshaw"

-  Dodge dragonfly - turn signal (with no upper shadow, long lower shadow) 

-  Gravestone Doji - dojo opening and closing prices which equal to the lowest price of the session. turn signal is on top with an upward trend. It may also be a reversal signal at the base with a downward trend, but only if the bullish confirmation for the next session. 

-  White marubodzu - bulls dominated with preservation of uptrend (no shadow) 

-   Black marubodzu (literally this bald monk) - Bears dominated maintaining downtrend (no shadows)

 
Combinations of candles

Despite the simplicity of the given species, there are also more complex cases. Long-term observation of the Japanese candlestick charts allow traders to observe certain signals, consisting of two, three or more candles. However, as a rule many of the most famous combinations contain 2-3 candles. Among these models can be noted "the veil of dark clouds", "bullish engulfing", "breaks tasuki", "three black crows", "bottom step," "abandoned baby" and many others. 

Candles and trading volume

«Yaponskiye svechi» otrazhayut ne tol'ko tsenu, no i yeyo volatil'nost' — «razbros tsen», kogda zayavki «kupit'/prodat' po rynku» idut v ogromnom kolichestve v obe storony srazu. Prichiny, po kotorym tsena byla neustoychiva, vyyasnyatsya pozzhe, kogda vso budet zakoncheno. Poetomu uchastniki torgov otslezhivayut dni, kogda nachinayetsya neozhidanno bol'shoy «razbros tsen» po kakoy-libo tsennoy bumage. Kak pravilo, v etoy tochke ob"yom torgov rezko vozrastayet, a zatem padayet.

"Candlesticks" reflect not only price, but also its volatility - "price dispersion" when the application "buy / sell at the market" come in large numbers in both directions at once. The reasons for which the price was unstable, it turned out, when everything is finished. Therefore bidders track days when starts unexpectedly large "price dispersion" for any security. Typically, at this point sharply increased volume of trading, and then falls.

"The signal of danger, often a signal that the deal should be closed immediately, was a one-day turnaround - price fluctuation at the end of a long-term movement. The one-day turnaround occurs when the highest point of the day is higher than the highest point of the previous day, but the level of the closing of the day is lower than the previous closing, and the volume of the current trading day higher than the previous day's volume. Such a scenario for Livermore was screaming alarm. "

"Japanese candles", "hanging" over the price graph correspond to a state where supply and demand on the market do not allow you to set the final price. The exchange ratio may be four of these indicators at any price and value achieved any volume of trading: 

- Those wishing to buy more than willing to sell - the demand exceeds supply - the price increases
- Wanting to sell more than willing to buy - a proposal higher than the demand - the price falls
- Wanting to buy as much as wanting to sell - supply and demand are equal - the price does not change, "sideways"
 - Status of uncertainty - "turning point" after which the securities owners start to "dump" them at any price 

 The fourth condition arises when those who could sell the shares, are not willing to sell them, because they are still confident that there will be further growth, but those who could buy shares, do not wish to buy them, because they know that no growth will not be. This state is unstable: any external event could push prices in either direction. Typically, at this point of trading volume decreases, and when the price is set, it increases again.And finally, together with the constant large volume of "candles" and bidders may suggest the most probable direction of price movement. When the body is "candle" white, bidders are not afraid to buy stocks before the end of the trading day. Because of this belief quotes can continue to grow and the next day. For black "candle" the opposite is true.