History Of Candlesticks

History

Candlesticks are the invention of Japanese in the 17th century. Candlesticks are the mapping of the historical data gathered from the facts. In the 16th century, Japanese traders/analysts use candlestick charting method for graphical representation. Excellency behind the candlestick formation is four major factors (high, low, open and close) should be visible in a single chart. There was line chart but it has four different lines for four different prices for single trade happened too much confusion!!
As per the book “Beyond Candlesticks” by “steve Nison” in the warehouses of Osaka the number of rice dealers increased to 1300 in 1642, trades used to happen at an actual cost which was set by a bargain. Until 1710, but due to issues of rice exchange and rice warehouse receipts (rice coupons) gave birth to a future contract, which is happened to be the world's first Future contract. After this technical analysis of the charts started evolving.

Candlesticks structure:
Technical analysts wanted to plot four different prices for a trade. One started with a simple shape of a rectangle. So plotting two different rectangular shapes or candles for different prices one is high and low another for open and close. But couldn’t merge both due to there is no standard rule for any of the price e.g high can be the highest point than opening or closing same with the low or anywhere it can be. And that’s where a line took the place for one of the rectangle or candles while simultaneously colour got into the picture. The filled candlesticks for bearish while no colour candlesticks for bullish. The reason behind colour combination is because at that time dark colour blue and black used to write, and falling market or bearish market is the evil consideration. And if evil is coming then the candlestick is filled with dark colour or else no colour. Today the colour combination is replaced with red for bearish and green for bullish candlesticks. 

Patterns
How to form a candlestick.... 

• Decide a time frame also known as trading period/span. That time frame can be anything from one second to, a minute, an hour, a month, a week, a year, so on… But in daily, weekly, monthly and yearly candlesticks are famous amongst then. 
• Note downOpening price, closing price, highest price, lowest price of the trade within that specific time frame. 
• Start drawing a line (vertical line) going through all prices throughout the trading period. So here one can get the highest and lowest point/price of the trade within that particular trading period. That is our stick. 
• Drawing a rectangle having the top and the bottom of the shaped opening and closing price of the trade in any sequence. Here candle is formed. 
• So candle becomes white/green when closing price is on the top and opening price on the bottom. 
• Inversely if the closing price at the bottom and opening price at the top the candle becomes black/red. 
• Upper portion above the candle is known as upper shadow and a lower portion of the candle is known as the lower shadow. 
• This Process repeats for next time frame. Next time frame starts at the moment the previous candle completes. And that’s how a chart becomes ready for study.

Types of candlestick patterns: 

• Single candlestick patterns 
• Two candlesticks patterns 
• Three candlesticks patterns 
• More than three candlesticks patterns 
• Chart formation.

Single Candlestick patterns:

• White Candlestick: 
• Within a specific time frame/trading period when, 
• Lowest price of the trade is lower than or equal to opening of the trading price, 
• Closing price is higher than opening price on the trading 
• Highest price is higher than or equal to closing price
• This type of candlestick is shown by green colour or no colour or white colour inside the candle.
• Types of Bullish Candlestick pattern: 
• White body 
• Big white candle 
• Marubozu 
• Long shadow 
• Hammer/inverted hammer 
• Shaven head

• Black Candlestick: 
• Within a specific time frame/trading period when, 
• Lowest price of the trade is lower than or equal to closing of the trading price, 
• Closing price is lower than opening price on the trading 
• Highest price is higher than or equal to opening price
• This type of candlestick is shown by Red colour or Black colour inside the candle.
• Types of black Candlesticks
• Black body 
• Big Black Candle 
• Mozuboru 
• Long shadow 
• Hanging man 
• Inverted black hammer 
• Shaven bottom