We all know what a physical candlestick looks like. It sits there grandly on the dining room table, elegantly ready to add style and grace to even the simplest dinner. A chart, on the other hand, is a record of an activity or of a natural event or series of events. It is often used as the basis of forecasting, because without having understood the past, it is difficult to deal with future unknowns. A candlestick chart adds the benefit of an understanding of the human emotion factor which often impacts decisions which have an effect years later.

In the financial world, especially in the world of traded investments, we are accustomed to using the bar chart, which has been in use for hundreds of years. In the case of a record of stock prices as traded during a given day, the bar chart simply marks with a vertical line the high and the low of prices achieved during that particular day, together with a tiny blip at the left side of the line indicating the opening price of the day and a corresponding blip on the right side of the line indicating the closing price of the day. The bar chart can be used in all time frames, too; there are bar charts of prices from years down to minutes. It is a simple record of the fact, but it tells us little, if anything, of the emotional factors which resulted in the prices as recorded, which after all are the result of group activity.

In our quest for knowledge, we seek to understand the “why” as well as the “what.” Candlestick charts help us to understand the “why” part of financial decisions which impact the financial markets every day. This form of charting simply “fattens out” that portion of the bar chart which represents the area between the opening price and the closing price. If the close on a given day (or week, for example) was higher than the opening price, then the fatted-out portion of the bar chart is left blank, or white. If the closing price was lower than the opening price, then the fatted-out portion is filled in, or made black.

How simple that is, and still it reveals so much more, and it does so in the blink of an eye. The candlestick chart really comes into its own when the data being fed to it electronically are real time data. Then the presentation takes the form of a picture in constant motion; and we can watch in fascination as hundreds of independent investment decisions come together second after second to produce the motion picture - the “movie” - which is the result of human emotion acting in concert, right there before our eyes.