Candlestick charts are the Japanese version of bar charting and have become very popular in recent years among western chartists. The Japanese candlestick records the same four prices as the traditional bar chart—the open, the close, the high, and the low. The visual presentation differs however. On the candlestick chart, a thin line (called the shadow) shows the day's price range from the high to the low. A wider portion of the bar (called the real body) measures the distance between the open and the close. If the close is higher than the open, the real body is white (posi­tive). If the close is lower than the open, the real body is black (negative). (See Figure 3.4.)
The key to candlestick charts is the relationship between the open and the close. Possibly because of the growing popular­ity of candlesticks, western chartists now pay a lot more attention to the opening tic on their bar charts. You can do everything with a candlestick chart that you can do with a bar chart. In other words, all the technical tools and indicators we'll be showing you for the bar chart can also be used on candlesticks. We'll show you a bit later in the chapter how to construct bar charts for weekly and monthly periods. You can do the same with candlesticks. Chapter 12, "Japanese Candlesticks," provides a more thorough explanation of candlestick charting.