Now that we have understood what is Technical Analysis and why do they work, let’s us now jump right into the most important basics of Technical Analysis, which is to understand what are candlesticks. To put it simply, candlesticks are basically the individual boxes (can be green-red or black-white) that made up a chart. They represent the open, close, high and low price of a particular instrument within a specific time period. In this post, we are going to learn about the origin of candlesticks, its basic patterns and how to interpret them.
Where it came from
The Japanese candlesticks or what is commonly known as candlesticks have come a long way since it was first used around 1600. It was first used by a rice trader in Japan called Homma. During the period between 16th and 17th Century, many of Japanese areas are engaging in a civil war, which is why many of the candlestick patterns are named after military terms.
It was not until the last 2 decades that candlesticks start to popularize the investment world. After an extensive 3 year long research done by Steve Nison, he finally managed to popularize candlesticks in the West through its initial publication of “Japanese Candlesticks Charting Techniques”, published in 1991.
Many investors and traders discussed about fancy charting techniques, oscillators and momentum indicators. Before we go deeper into all the fancy jargons, it all comes back down to the basic understanding of technical analysis and where it came from. So, what exactly is Technical Analysis?
There are 4 main things that you should know about Technical Analysis. That is, TA consists of charts, TA is subjective, TA reflects emotions and TA can be used by different instruments.