What is a candlestick pattern?

In financial technical analysis, a candlestick pattern is a movement in prices shown graphically on a candlestick chart that some believe can predict a particular market movement. The recognition of the pattern is subjective and programs that are used for charting have to rely on predefined rules to match the pattern.

What are Japanese candlestick charts?

One form of trading using technical analysis involves the use of the Japanese candlestick charts. What is a Candlestick Chart? A candlestick chart is a visual way of displaying the price movements of financial instruments such as derivatives, securities or currency. It shows an asset's price movement of a set period of time.

Why do traders use Candlestick charts?

Traders use candlestick charts to determine possible price movement based on past patterns. Candlesticks are useful when trading as they show four price points (open, close, high, and low) throughout the period the trader specifies. Many algorithms are based on the same price information shown in candlestick charts.

What is the difference between a bar chart and a candlestick chart?

Shadows can be long or short. Bar charts and candlestick charts show the same information, just in a different way. Candlestick charts are more visual due to the color coding of the price bars and thicker real bodies. Highlighting prices this way makes it easier for some traders to view the difference between the open and close.