We can analyze each candlestick from three angles: the size of the body, the length of the shadow, and the trading volume.

Because of its simplicity, beauty and easy interpretation, the candlestick chart is widely used in various financial asset markets.

Concept Detailed Explanation The candlestick chart is a price chart that shows the highest price, the lowest price, the opening price and the closing price of a certain financial asset within a specific time frame.

The candlestick chart was invented by a Japanese rice merchant named Munehisa Homma in the 18th century, who first used the candlestick chart in the rice futures market. In the 1990s, an American named Steve Nison published the book "Japanese Candlestick Charting Technique", which introduced the candlestick chart to the Western financial world. After that, Munehisa Homma's candlestick chart theory was constantly modified and adjusted to be more applicable to modern financial markets.

What is a candlestick chart? -1 The above figure shows the components of a candlestick chart.

A candlestick chart usually consists of three parts: body, shadows, and color.

There are four data points in each candlestick: the opening price, the highest price, the lowest price, and the closing price of a specific time period.

The opening price refers to the transaction price of the first transaction in that specific period, and the closing price is the transaction price of the last transaction in that period. The rectangle drawn by connecting the opening price and the closing price is considered to be the body of the candlestick.

The vertical line connecting the highest price and the body is called the upper shadow of the candlestick. And the vertical line connecting the lowest price and the body is called the lower shadow.

If the closing price is higher than the opening price, the candlestick is usually drawn as a hollow green, forming a positive line representing a rising price. On the contrary, if the closing price is lower than the opening price, the candlestick is usually painted as a red body to indicate a negative line.

A special case occurs when the opening price and the closing price are almost equal. The candlestick in this case is usually called a "cross star".

In summary, the real body shows the opening and closing prices of the day, the shadow shows the high and low of the day, and the color indicates the direction of movement during the formation of the candlestick.

How to interpret candlesticks Each candlestick tells the story of the game between bulls and bears. To become a professional trader, the first thing you need to learn is to read candlesticks.

Generally speaking, traders can interpret candlesticks by checking the following three aspects:

1. Real body size

Yang candlesticks with large real bodies indicate that buyers are in a strong position. Conversely, Yin candlesticks with large real bodies indicate that sellers are in a strong position.

2. Length of shadows

Long shadows indicate that prices fluctuated greatly at one time, but eventually returned to the original price level, showing that market sentiment is in uncertainty. Short shadows indicate that the market is relatively mild. Generally speaking, the longer the shadow, the greater the possibility that the price will move in the opposite direction of the shadow.

3. Trading volume

A key indicator worth noting when analyzing candlesticks is the trading volume tied to it. If the price increase is accompanied by an increase in trading volume, the upward trend is more likely to strengthen. However, if the price rises sharply and the trading volume decreases, it suggests that the rise may not last long.

The candlestick chart conveys market trading information very intuitively, so it is widely used in various financial asset markets such as foreign exchange, commodities, government bonds and stocks.