Option Investor
Glossary

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Candlestick Charting

Candlestick Charting has evolved from a Japanese style of charting used over 400 years ago. Candlestick Charting was initially very popular in the Eastern countries, but has since caught on in the West as well. Candlestick Charting has rapidly become a well known and widely used method for technical analysis.

Candlestick Charting is similar to that of bar charting (see Bar Charts), however the emphasis is placed on the open and closing prices rather than the high and low. A candle chart includes the open, low, high and close for a specific day. What really sets the candle chart apart from the bar chart is a wide section that is called the "real body". This section of the candle illustrates the range between the open and the close. Another unique feature of the candle chart is what is referred to as the "shadows". On the charts, this feature resembles the wick of a candle and is used to illustrate the high and low for the day. When the close is higher than the open, the body is colored red or left white. When the close is lower than the open, the body is colored black. If the price for the day was unchanged, a horizontal line will be used in place of the body.