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Chapter 8. The advanced futures trading ... > Japanese candlestick charts

Japanese candlestick charts

Candlesticks are the third major charting method, used by the Japanese before charting ever became popular in the West. Rice futures were active in Japan as early as the 1700s, and the traders of the day developed this earliest form of technical analysis. Bar charts use bars, point and figure charts use Xs and Os, and candlestick charts use rows of candles with wicks on either end. The body of each candle is the distance between the opening and closing prices. If the closing price is higher than the open, the body is left empty or white (or it could be one color like blue). If the closing price is lower than the open, the body is filled in with black (or another color like red). The upper wick represents the high, and the lower wick represents the low. The wicks are not as important as the body. In other words, candlestick chartists are not as interested in the day's high or low as they are in the relationship between the open and the close.

Chart 8.42. Point and figure



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