What is a Candlestick, bullish and bearish candles in Forex Trading

CANDLESTICK


  • Candlesticks were introduced by a Japanese rice trader, Munehisa Homma in 18th century. 
  • He thought that trader should consider high and low values too along with open and close values, then he created candlestick in which body and wick of the candle represents high, low, open, close values . 
  • He made fortune by introducing candlesticks and their analysis into his trading techniques. 

FOREX CANDLESTICK ANALYSIS



  • Every candlestick has two parts BODY and SHADOW.  
  • The length of the body and shadow were based on OPEN, CLOSE, HIGH and LOW. 
  • When the price opens and makes some fluctuations up and down then closes after some period of time, the highest point it reached is high and lowest point it reached in that period is low and the value where it closes is close point. 
  • The body is formed between open and close point and if the price moved above and below the OPEN and CLOSE points then the movement is shown in straight line (SHADOW / WICK) till the high and low point.

Open point to close point      ------>   BODY   < ---- Close point to open point


Open point to low/high point ---> SHADOW / WICK<---Close point to low/high point


  • Candlesticks shows us information about open, close, high and low values of a price in particular time, the time may be 1 min, 5 min, 15min, 30min,  1 hour, 2hour, 4hour....so on
See the shape of a candlestick and the terms written
bullish and bearish bars


  • There are two types of candles one is bull candle and the other one is bear, the candle in blue color is BULL candle and in red color is BEAR candle.

Bull/Bullish Candle:

  • The close value of the candle is always above the open value of the candle, the gap between the close and open doesn’t matter. 
  • Why it is called bull, because the nature of the candle is like bull fighting. A bull always moves it head from DOWN to UP while it is attacking
  • In the same way BULL CANDLE STARTS FROM DOWN AND MOVES TO UP. For example see the above picture the candle that is in blue color representing bullish candle in which the close point is above the open point FROM LOW TO HIGH

Bear/Bearish Candle:

  • The close value is always below the open value of the candle, how much the gap between the close and open doesn’t matter. 
  • Why it is called bearish, same way the bear use its bottom part to fight.  A bear always fights from TOP to BOTTOM. 
  • If we see the above picture the candle that is in red color represents the bear candle in which the close point is below the open point. So bear candle starts from up and moves to down.

These candles plays crucial role in forex trading every kind of technical analysis need candlestick values, without candles either it is bull or bear candle there is no chart formation