Japanese candlestick chart

A candlestick chart (also called Japanese candlestick chart) is a style of financial chart used to describe price movements of a security, derivative, or currency. Each "candlestick" typically shows one day; so for example a one-month chart may show the 20 trading days as 20 "candlesticks".

It is like a combination of line-chart and a bar-chart: each bar represents all four important pieces of information for that day: the open, the close, the high and the low. Being densely packed with information, they tend to represent trading patterns over short periods of time, often a few days or a few trading sessions.

Candlestick charts are most often used in technical analysis of equity and currency price patterns. They appear superficially similar to box plots, but are unrelated.

Candlestick charts are thought to have been developed in the 18th century by Munehisa Homma, a Japanese rice trader of financial instruments. They were introduced to the Western world by Steve Nison in his book, Japanese Candlestick Charting Techniques. They are often used today in stock analysis along with other analytical tools such as Fibonacci analysis (Fibonacci retracement).

In Beyond Candlesticks, Nison says, "However, based on my research, it is unlikely that Homma used candle charts. As will be seen later, when I discuss the evolution of the candle charts, it was more likely that candle charts were developed in the early part of the Meiji period in Japan (in the late 1800s)."

Candlesticks are usually composed of the body (black or white), and an upper and a lower shadow (wick): the area between the open and the close is called the real body, price excursions above and below the real body are called shadows. The wick illustrates the highest and lowest traded prices of a security during the time interval represented. The body illustrates the opening and closing trades. If the security closed higher than it opened, the body is hollow or unfilled, with the opening price at the bottom of the body and the closing price at the top. If the security closed lower than it opened, the body is solid or filled, with the opening price at the top and the closing price at the bottom. A black candle represents a price action with a lower closing price than the prior candle's close. A white candle represents a higher closing price than the prior candle's close. Thus, the color of the candle represents the price movement relative to the prior period's close and the "fill" (solid or hollow) of the candle represents the price direction of the period in isolation (solid for a higher open and lower close; hollow for a lower open and a higher close). A candlestick need not have either a body or a wick.

...
Wikipedia