The Chart Professor is back so we can dive further into the stock charts you need to understand and analyze to make smart investment decisions.
This week Bruce Kamich, our resident Chart Professor and in-house technical analyst, teaches us all about the candlestick chart.
Candlestick charts originated in Japan in the 1700s and were used to trade rice, he says. Basically, the Japanese created a chart that shows the link between the price of rice and the traders' emotions.
The little "candlesticks," or rectangles, are created using the opening and closing price, but little lines that extend from those rectangles show the highs and lows of the day -- thats the emotional part. The longer the lines, the bigger the difference between the opening and closing prices.
Even better, this chart uses color to show who's in charge -- the bulls or the bears. If the bulls are charge -- the candlesticks may be white or green. If the bears are pulling the stock down, the candlestick may be red or pink.
And the bigger the body of the candlestick, the bigger the spread between the open and closing prices.
So you can learn a lot. But no chart is perfect. Below are Kamich's pros and cons.
- Reveal more info
- Reversals are quick
- Can give you an edge over other traders
- Does not work on intraday charts
- Does not give price targets
So watch the video above now to learn more and be sure to reach out to either of us if you have any questions or want us to cover something special @ tracybyrnes @ brucekamich.
Be sure to check out our other great chart videos too:
- Chart Professor: 3 Things You Need to Know About Every Stock Chart
- Chart Professor: How to Make Money from a Stock Line Graph
- Chart Professor: A Bar Graph Shows a Stock's Extremes and Gaps
Read more from Kamich on Real Money and learn from the best.