^Source

QUESTIONS
1a) Explain the Japanese candlestick chart? (Original screenshot required).
b) In your own words, explain why the Japanese Candlestick chart is the most used in the financial market.
c) Describe a bullish and bearish candle. Also, explain its anatomy. (Original screenshot required)

WHAT ARE CANDLESTICKS?

Candlesticks in trading can simply be defined as a technique or way of displaying vital and crucial information about an asset or commodities price movements and fluctuations.

^Source

In TRADING, candlesticks are one of the most vital ingredients in technical analysis.

It enables traders to predict or comprehend market movements just from looking at a few price bars.

THREE IMPORTANT BASIC FEATURES OR COMPONENTS OF A CANDLESTICK.

• THE BODY

• THE WICK

• THE COLOUR

• THE BODY:

This feature is concerned with the open and close range.

• THE WICK:

This is also popularly known as the shadow, it simply indicates the intra day movements either high or low.

^Source

• THE COLOUR:

This feature describes the direction of market movements or direction. Colors like white or green indicate a market price increase while red or black colors represent the opposite.

^Healthline

As time goes on during the process of trading, candlesticks form particular patterns which can help traders to recognize major support and resistance levels.

There are a lot of major Candlestick patterns used by traders today, but in this course we will be talking about the famous "JAPANESE CANDLESTICK CHART".

HISTORY OF JAPANESE CANDLESTICKS

This is one of the most popular and rampantly used charts in modern day crypto currency trading and stock market. It's a technical analysis tool used by traders to analyze the price movements of securities and assets.

It was first developed by a Japanese rice trader named "Munehisa Homma".

source

While conducting his routine trading activities, Homma discovered that the rice market was highly dependent on the emotions of his traders and buyers but still not disregarding the effects of the demand and supply on the price of rice.

^Source

Homma then developed an innovative way of producing candlesticks that graphically represented the nature of price movements by using colors to tell the differences. Modern day traders can apply this technique to determine market price patterns and actions in order to make decisions based on short term direction of the prices.

Using this immortal technique Homma prospered in his rice trading business.

In the year 1870, the Japanese stock exchange came into existence and the local technical analyst then adopted Homma's Candlestick concept into the whole trading process.

This great trading technique was incorporated into western trading processes through a book written by analyst "Steve Nison" in his book which was titled, "Japanese Candlestick Charting Technique".

Now in modern day trading the Japanese trading chart is a very important and popular trading indicator used by traders all around the world.

CANDLESTICK CHARTS

This is more like an arrangement of bars, that helps traders or analysts determine and predict the price movement of markets. These bars are formed through the everyday activities of traders on the market but still following the usual and normal laws of supply and demand.

^Source

This is a simple concept, when the demand in the market is high, a bullish candle is formed but when the demand is low a bearish candle is also formed. The visual and graphical representation of these bullish and bearish candles sums up the whole concept of the Japanese candlestick chart.

The candlestick chart makes available lots and lots of important and vital information to traders. Such informations may include :

• The Opening and closing time or range of an asset or security.
• The trend movement of an asset.
• The rate or level of demand and supply.

All this critical information listed above helps a trader make appropriate and right decisions when it comes to buying and selling of assets on the crypto market.

Sometimes the Japanese candlestick chart is confused with bar charts, because they provide almost the Same information to traders but they come in a different graphical platform.

IN YOUR OWN WORDS EXPLAIN WHY THE JAPANESE CANDLESTICKS CK CHART IS THE MOST USED IN THE FINANCIAL MARKET.

The formation of Japanese candlesticks depends solely on the activities of traders on the market. All this important information is displayed and viewed by traders in a graphical format or bar-like charts called " JAPANESE CANDLESTICK CHART".

This chart as earlier discussed helps traders make predictions about the current and updated happenings on the market,helping them make proper predictions and decisions on when to buy and sell assets and securities.

The vital information provided by this charts include :

• The rate of demand
• The selling rate
• Opening and closing point

• The rate of demand:

When the rate of demand or request of an asset is on the high side, a fat bullish candle will be formed on the chart. It simply tells the trader that there are still a lot of traders ready to buy an asset in the market.

• The selling rate:

If the selling rate of a security or asset is on the high side, the demand reduces. Therefore a bearish candle will be formed on the chart for that particular time frame.

• Opening and closing point:

The Japanese candlestick chart aids traders to determine precisely the point at which a new price starts and the point at which it ends on the market within a particular period of time.

All the features of the Japanese candlestick chart provides a very comprehensive graphical representation pattern which traders take advantage of, they add other technical analysis tools in order to make almost perfect predictions of market movements and price direction.

All these above features prove that the Japanese candlestick chart is one of the most easy but yet sufficient technical analysis tools used by traders to predict future price movements and directions.

DESCRIBE A BULLISH AND BEARISH CANDLE, ALSO EXPLAIN ITS ANATOMY. (Original screenshots required)

^Source

The Japanese candlestick chart comprises of two major types of candle sticks namely

• Bullish

• Bearish

• BULLISH CANDLE:

A bullish candle informs or provides necessary information for traders, to help them know or predict when there is about to be an uptrend after a previous downturn in price. It is simply a signal showing that the bulls are ready and capable of taking over the market and this can even push the prices up even further.

ANATOMY OF A BULLISH CANDLESTICK

The body of a bullish candle is made up of four distinctive parts:

^Source

• THE HIGH:
  The high is simply that maximum point or level attained by the bullish candle before it closes at a point below it. It is sometimes also referred to as the shadow of the candle.

• THE LOW:

As the "HIGH", This can also be called the shadow or reflection of the candle. It is simply the lowest point attained by the bullish candle and it is found at the lower opening of the candle.

• THE OPEN:

This is the point at which a new bullish candle starts to form after the previous one ends. It provides a trader with information of the inception of new price fluctuations within a given period of time. It is located below the close of a candlestick.

• THE CLOSE:

Over a certain period of time a bullish candle closes, this is referred to as "the close". It is located above the opening of a candlestick.

THE BEARISH CANDLESTICK

^Source

A bearish candlestick provides a trader with info when there is low demand for an asset or security on the market, within a given period of time. It simply means that they are more sellers than buyers present in a given market over a certain period of time.

A bearish candle opens just at the end of the previous candlestick but this time it faces downwards and it closes just below the open.

ANATOMY OF A BEARISH CANDLESTICK

Just like its opposite counterpart, the bearish candlestick is made up of 4 major parts.

• THE HIGH:

The high simply means the highest point that a bearish candle reaches. And it is usually above the point of the candle opening.

• THE LOW:

This is the lowest point attained by a bearish candlestick. Just like the high, the low is usually formed below the closing point of the previous candlestick.

• THE OPEN:

This Is simply referred to as the point where a new bearish candlestick starts to form. It shows a trader signs that a bearish price movement is about to begin.

• THE CLOSE:

This simply signifies the close of a bearish price movement in the market, within a given period of time.

CONCLUSION

In conclusion, according to all the points discussed above it is quite an obvious fact that the concept of the Japanese candlesticks invented by "Homma" and publicized by "Steve Nison" provided modern day traders with more detailed and accurate information about price fluctuations and movements.

The Japanese candlesticks provide a deeper graphical insight on the supply and demand of assets and securities on the market, within any period of time. This concept and technical tool has been utilized for a very long period of time,

It's usefulness and ease of operation has made it one of the most widely used technical analysis tools used by modern day crypto traders and analysts.

I am so grateful for the privilege of participating in this educational and useful course. It has widened my perception and knowledge on the various uses of Japanese candlesticks and candle sticks in general for technical analysis in trading.

However I have also learned that this tool cannot be used on its own, it must be used alongside other trading indicators or trading analysis tools such as Bollinger bands or RSI e.t.c. In order to get the best and most accurate information on price market movements.

THANK YOU FOR READING….

And a special Thank you goes to professor @reminiscence01, for giving us this important course of study.