Candlestick Chart

The candlestick chart originated in Japan in the 18th century, developed by Munehisa Homma, a Japanese rice trader. He used candlestick patterns to predict rice price movements based on market psychology. Each candlestick represents open, high, low, and close prices, with different colors (green or red) to indicate market sentiment. It is now the most widely used chart in technical analysis, providing deep insights into market trends and reversals.

Importance

• Most popular chart type for technical analysis.
• Helps identify trend reversals, continuations, and market sentiment.
• Provides clear trading signals through candlestick patterns like Doji, Engulfing, and Hammer.

Limitations

• Requires knowledge of candlestick patterns for effective use.
• Can be misleading in low-volume markets.