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History of Candlesticks

In the 18th century a wealthy Japanese businessman, Munehisa Homma developed a technical analysis method to analyze the price of rice contracts. Today this technique is called candlestick charting and is widely used when drawing stock charts. Homma, from Sakata, Japan began trading at the local rice exchange around 1750. He kept records of the market psychology learning to boost his profits by carefully monitoring prices and not to rushing into trades.

Homma is regarded as the Grandfather of candlesticks because of his research on price pattern recognition. Homma is credited with giving rise to a research technique which became the basis for trading in Japan.


Candlestick charts use the same price data as bar charts (open, high, low, close). However, candlestick charts are drawn in a much more visually identifiable way typically resembling a candle with wicks on both ends. The high and low are described as shadows and plotted as a single line.

Learning how to read candlestick charts is easy. The price range between the open and close is plotted as a rectangle on the single line. If the close is above the open, the body of the rectangle is white. If the close of the day is below the open, the body of the rectangle is red.


See the patterns. Quiz yourself.


HotCandlestick.com uses red to represent blood as in Homma's references to the battle between the buyers and sellers being analogous to wars waged in ancient Japanese times. More recently in the Western world we refer to the war between bulls and bears. When the bears are winning the war sometimes we hear analysts talk about blood on the street.

Japanese candlestick analysis is a tool that offers a glimmer into the psychology of short term trading activity. This tool can be powerful when used in combination with other technical analysis tools.

Steve Nison, Father of candlesticks and author of popular candlestick charting books such as Strategies for Profiting with Japanese Candlestick Charts and Beyond Candlesticks: New Japanese Charting Techniques Revealed is widely credited with bringing candlestick charting to the Western world from Japan in 1989 when he published his first article on candlestick analysis in Futures magazine.

HotCandlestick.com, LLC is not affiliated in any way with Steve Nison.

Many authors of candlestick charting books have greatly contributed to the knowledge base and popularity of candlesticks. As reference material this web site uses some of the basic concepts of candlestick charting found in many respected publications.

Next Page:  How does HotCandlestick.com determine the strength of a candlestick pattern?


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