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Investopedia Academy - Technical Analysis - Lesson 5.2 - Candlesticks - YouTube
Channel: Mike's Trading Channel
[7]
The next type of chart is the Japanese聽
candlestick and this was really first used by聽聽
[12]
a gentleman by the name of Mona Hisa Homa, he was聽
a Japanese rice Futures Trader back in the 1700's聽聽
[19]
and we're going to talk about a little bit聽
about how these candle sticks are constructed聽聽
[23]
they're very similar to the bar chart in that聽
you have a high a low an open and a close but聽聽
[31]
from a visualization standpoint the candlestick聽
is going to tell us a story okay so we're going to聽聽
[37]
use days for periods just to keep things simple so聽
let's say this candlestick is a given day you have聽聽
[43]
a hollow candle and you have a filled candle so聽
let's talk about what the differences are the high聽聽
[50]
of the day of course and the low of the day is聽
the same in both types of charts but if you have a聽聽
[55]
hollow candlestick this is what's called the聽
real body if the real body is not filled and聽聽
[61]
it's hollow that means that the closing price is聽
above the opening price in the case of a filled聽聽
[68]
candle where the candle has essentially melted聽
it is indicating to us that the opening price is聽聽
[75]
above the closing price so hollow candle we have聽
the close above the open and a filled candle the聽聽
[82]
close below the open whether it's up or down on聽
that given day based on the prior periods closed聽聽
[90]
is irrelevant when it comes to the hollow and the聽
filled construction of the candlestick this is聽聽
[96]
only to do with the period that we're discussing聽
here's a great example of a filled candlestick聽聽
[103]
in this case the open was here this was the聽
high of the day which intraday went even higher聽聽
[109]
closed near the lows of the day but not quite聽
towards the bottom in this case it's basically聽聽
[114]
the exact same candlestick except one's hollow聽
and once filled so in this case it's the opposite聽聽
[119]
it opened near the lows of the day and went out聽
on the day near the near the highs we had a little聽聽
[125]
bit of a spike intraday that it didn't quite reach聽
there on the close and we had a little bit of a聽聽
[130]
dip below the open but at the end of the day we聽
went out near the highs this is something that聽聽
[134]
we described as a bullish candlestick this聽
melted candlestick would be even more bearish聽聽
[140]
here's another great example where we have a聽
long shadow that wick on top of the candlestick聽聽
[145]
is what we call a shadow the longer it is to聽
the upside the more the reversal the more the聽聽
[152]
sellers took control of that specific period so聽
while this is bullish and this is bearish i would聽聽
[159]
argue that something like this that reversed聽
this dramatically would be even more bearish聽聽
[165]
now we're going to talk about the聽
individual colours of the chart聽聽
[168]
and i think that this is something that's聽
not explained very often here we have green聽聽
[175]
uh candlesticks and we have red candlesticks聽
the group the colours of the candlesticks are聽聽
[181]
determined based on where the price is compared to聽
where it was in the prior period okay so if we're聽聽
[188]
looking at a daily chart and the candlestick is聽
green that means the closing price for that day聽聽
[194]
was above the previous day's close it has nothing聽
to do with where it closed based on the open聽聽
[200]
the colour is simply based on where it closes聽
relative to the prior period now remember聽聽
[207]
we can have hollow red candles just like we can聽
have filled green candles so in this case let's聽聽
[214]
look at an example of a red hollow candle in this聽
case we have a closing price in the prior day聽聽
[221]
the opening price is substantially lower so聽
the the stock gaps lower the following day聽聽
[228]
rallies throughout the entire day to close near聽
the highs so since it closed above the open it聽聽
[234]
is a hollow real body but since it's the closes聽
below the previous days closed it's going to be聽聽
[241]
red here's the opposite in this case we have a聽
green filled candle so on this particular day聽聽
[248]
the market went out near the highs of the聽
day and what this candle is suggesting to us聽聽
[253]
is that the following day the market gaped up to聽
open substantially higher than the previous closed聽聽
[259]
however melted throughout the rest of the聽
day to close near the lows but since it聽聽
[266]
closed still near the lows of the day but above聽
the prior days close it's going to remain green聽聽
[272]
so let's remember that the colour has nothing聽
to do with where it closes based on the open聽聽
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but where it closes based on the prior close聽
so there are four types of candlesticks that聽聽
[283]
we're essentially accustomed to seeing聽
green hollow ones red hollow ones聽聽
[289]
green filled ones and red filled ones so let's go聽
over this again if you have a green hollow candle聽聽
[296]
that means the close is above the opening price聽
and the close is also above the prior close聽聽
[305]
the red hollow candle is going to close above the聽
opening price but below the prior day's close the聽聽
[314]
green filled candle is going to close below the聽
open but still above the prior day's close and聽聽
[322]
the red filled candle is going to close below the聽
open as well as below the prior day's close you.
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