Candlestick-Lines

What Are The Candlestick Lines And How Do We Draw Them? An Easy Fix To Your Trading Dilemmas In 2023

Candles have forever been utilized as the source of light in the darkness and that’s precisely what candlestick lines do in the world of trading. Candlestick’s trading chart omitted all the ambiguities that a traditional western trading indicator contains.

Let’s briefly dig into the historical background of Candlestick Lines

Japanese are almost a century ahead of the rest of the world. Why are we exclaiming that? Japan is the only nation that believed in candlestick line patterns to make trades almost a century ago, rather than the rest of the world. Yes, it’s true and is an intriguing history.

Munehisa Homma was the first person who pioneered the practices for predicting future price movements using the past prices of certain commodities in the rice market. Homma’s trading principles evolved into the candlestick methodologies currently used in Japan.

Japan’s history is suffused by its military sacrifices during various wars, that’s why most of the candlestick charting techniques have been named after specific military strategies which they have been using to confront their enemies since that time. One must say that trading requires almost the same skills that one must need to win a war. So, you must be aware of the battlefield analogies before starting your trading journey.

A few of them are:
Advancing Three Soldiers, Gravestone, Night and Morning Attack, etc.
During the 17th century, the concept of a centralized marketplace evolved, indirectly leading to the development of “Technical Analysis” in Japan.

The social system of Japan was composed of four major classes at that time. The breakdown of these four classes in ascending order is

  • The Merchants
  • The Artisans
  • The Farmers
  • The Soldiers

The merchants were among the top-tiered class of society which is the reason that still the traditional greeting in Osaka Japan is “Mokarimakka“, the literal meaning of which is “Are you making a profit“?

Why have candle charting strategies captured the eye of investors and traders across the globe?

For centuries, Japanese candlestick charting techniques had been a hidden secret from the rest of the world. But these days, market makers, online traders, and even institutions also are some of the candlestick charting enthusiasts. And now almost all the charting tools come with the candlestick line patterns as their default chart.

Over time, the flames of interest grow even bigger for the candlestick charting tools. Why this is so?

  • Because candlestick charts are easy to understand even for first-time chartists.
  • Because they provide the earlier indications and reversal signals well before the time it happens.
  • Because they are flexible enough to get fused with the western indicators to provide a better understanding of the market trend.
  • Because their immediate visualization (i-e whether green candle or red candle) increases the efficiency and effectiveness of your technical analysis.
  • Because they hold a world of complete knowledge in themselves. They are quite interesting to learn.

Constructing the Candlestick Lines

Usually, a candlestick line is composed of 3 major parts:

  • A body (i-e the vertically rectangular shaped part of a candle in the middle)
  • Upper Wick / Upper Shadow
  • Lower Wick / Lower Shadow

The Body of a Candlestick

Similar to the Western bar chart, the candlestick uses the same open, close, high, and low for a particular candlestick. As shown in the above picture containing green and red candlesticks, the rectangular parts of these candles reflect their “real bodies“. The real rectangular body of a candle portrays the range between the trading session of a particular commodity’s open and close, for a stipulated time.

The real body of the red candle shows that the trading session started at a higher price and closes at a lower price. That is the upper point of the real body reflects the opening price and the lower point of the real body reflects the closing price.

Contrary to the above statement, the real body of the green candle shows that the trading session started at a lower price but it closed at a higher price that’s why it turned green in color. Here the lower point of the rectangular green-colored real body will be its opening price and the upper point of this real body will be the closing point of the trading commodity during a specific period.

The body of a candlestick is just like a nucleus of a cell. It plays a pivotal role to determine the candle’s trend. One gets an instant visual clue about the session’s trend and strength merely by looking at it.

The Upper Wick of a Candlestick

Wicks of a candlestick always pertain to its price extremes. The thin line erected on the upper side of the candlestick’s real body is known as the upper wick / upper shadow of a candlestick. The upper shadow of a candlestick is just like a traditional flaming wick of a candle. The upper wick comes into existence when the price of a particular commodity goes to its upper extreme but doesn’t close over here.

The Lower Wick of a Candlestick

The line originated from the bottom of a candlestick’s real body and goes vertically downwards is known as the lower wick / lower shadow of a candlestick. This bottom of the lower shadow reflects the lowest price of a commodity being traded but the session doesn’t close over here.

Shaven Head & Shaven Bottom Candlestick / Marubozu Full

The candlestick which doesn’t compose any of the wicks is known as the Shaven Candlestick / Marubozu Full Candlestick. Candlestick with no upper shadow is known as Shaven Head and with no lower shadow is known as Shaven Bottom Candlestick. Green colored Marubozu Full candlestick reflects the severe bullish dominance for that particular session and vice versa for the red-colored Shaven Head and Shaven Bottom candlestick.

Drawing Candlesticks Using Time Frames

Whether you are an intraday trader, a scalp trader, a long-term investor, a medium-term trader, or a short-term trader, you can opt for the time frames for trading as per your appetite and nature of trade. You can customize the candles for any time frame you want. The formation of the candlestick lines will be for that specified time you have opted for. These time frames range from minutes, hours, to even years.

Spinning Tops and Doji

Certain candlesticks lack the long rectangular real bodies but have long upper and lower wicks. These are known to be spinning tops. And a candlestick with no real body / or a fragile real body, whose opening and closing points for a session are the same is known as Doji.

These candlesticks lines mostly lead to trend-reversals because of the lack of potential to carry forward the ongoing previous trends. Further, we will thoroughly discuss them in the following articles.

The Bottom Line

The charming attribute of the candlestick line patterns is their color discrimination among themselves. We can say these candlestick line patterns colorfully describe the emotions and sentiments of the market which all other Western indicators and trading patterns lack.

Being the oldest ones, candlesticks patterns are still minimum of a century ahead of the rest of the world’s technology and they have become an integral part and necessity of the modified trading world.

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