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Candlestick charts are thought to have been developed in Japan towards the end of the 18th century by rice traders trying to make sense of price movements. Later it was adapted to the stock market, and today it is widespread in Forex analysis. It is one of the most popular indicator types in today’s markets due to the clear manner in which information is presented, and the extensive studies performed on it over the years.
Almost every single pattern, or formation which can develop on a candlestick chart has been analyzed thoroughly by analysts over the years, and you’ll never lack guidance on what to do when a particular pattern arises.
The small lines at the top and bottom of a candlestick are called wicks. When the body of the candlestick is white, prices have closed the timeframe in consideration (day, hours) with a rise in the price. When the body is black, we understand that the prices closed the time period at a lower value.
Candlestick patterns are analyzed according to their shapes. Let’s see a few examples:
1. White Candlestick: In this case the candlestick is made of a large white body with small upper and lower wicks. This formation signifies that the uptrend is ongoing.
2. Black candlestick: This pattern is the opposite of the white candlestick. The candlestick has a large black body, with small upper and lower wicks. This is also a continuation pattern in an ongoing downtrend.