Share Market Knowledge: What is a Candlestick? If you enter without learning this, the stock market will burn you to ashes.

Share market knowledge: In the past few years, many new people have entered the stock market. Many people start investing without learning and eventually quit the stock market after suffering losses. But it is very important to learn if one really wants to make money from stock market. The stock market is a field with an ocean depth. There is a lot to learn. There are many types of instruments for investing money, such as equities, futures and options, mutual funds, bonds, etc. In such a case, the question arises, where to start learning? What should be basic?

Just like the foundation of any child’s education is ‘ABCD’ or ‘ABGD’, learning in the stock market also begins with price. And the most important thing to understand the price is the candlestick. A candlestick contains a complete description of the price for a specific time period. By looking at just one candle of the day, you can know what has happened throughout the day.

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Candlestick shows the open, high, low and close price of any underlying (stock or index). After the candlestick is formed, it is usually divided into two parts, first – the main body, and second – the shadow. Some people also call Shadow as Wick. The real body is the difference between the opening and closing price, and the wick represents the rejection of the price. This rejection in price can be both up and down.

Belongs to the rice traders of Japan.
In the old days when there were no computers and calculators, traders faced a lot of difficulty in understanding prices. At that time, Japanese rice traders developed the candlestick method to understand the past and current price at a glance. It is said to have been invented by Manhisa Homa, a rice trader in the 18th century. A candlestick was formed on each trading day and by connecting one candlestick after another, a long-term price could be seen at a glance, also known as a Japanese candlestick chart or K-Line.

In 1991, an author named Steve Nason wrote a book on the Japanese candlestick charting technique. Western countries were introduced to this technology through this book. Gradually, candlestick patterns came to be used to track all kinds of sentiment. Candlestick made it easy to understand and track sentiment. No more going through old ledgers to see when the price went up and when the price went down.

Significance of candlestick in stock market
As you know, a candlestick provides price information for a specific period of time. For example – if a share closed at Rs 100 yesterday and today opens at Rs 101 and closes at Rs 103 with a high of Rs 105, you can get complete information by just looking at one candle. The candle of tomorrow and today will be made like this

If the candlesticks of several days are added, a complete chart is formed. You can view charts for 6 months, 1 year, 5 years or more simultaneously. At a glance you can see which direction the price moved on the chart. Market technical analysts (experts) make probabilistic predictions of share prices on this basis.

Overall, if you are taking the first step towards learning the stock market, learn to read candlesticks. Many more articles have been published in the Share Market Knowledge series, which you can read and understand by visiting the links below.

Why is one’s color green and one’s red?
In candles, some are green and some are red… why is that? A green candle indicates that today’s price has closed higher than the previous day’s price. Similarly, a red colored candle provides information about a decline in price. Below links are some old articles, from which you can know more about stock market.

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Also Read – Share Market Knowledge: These two things will tell the complete horoscope of the company, investors in the share market should not miss it.

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