What it is
A candlestick chart summarises each trading period with four numbers. The thick body spans from the opening to the closing price; it is coloured one way when the price rose and another when it fell. Thin wicks above and below reach the period’s highest and lowest prices.
✓ Use it when
- You have open, high, low and close values per day, week or month.
- You want to see both the direction and the range of movement in each period.
✗ Avoid it when
- You only have one value per period — a line chart is clearer.
- You have hundreds of periods on a small chart — candles shrink to slivers.
Tips for a better chart
- Name your columns Open, High, Low and Close and Chart Buffet will find them automatically.
- Trading days only: weekends are skipped, so candles sit evenly.
- Rising and falling colours conventionally follow green and red; Chart Buffet uses palette colours that stay distinguishable for colour-blind readers.
The maths
For each period the body spans [min(O, C), max(O, C)] and the wick spans [L, H], so L ≤ min(O, C) ≤ max(O, C) ≤ H always holds. The body’s length |C − O| is the net move; the full range H − L measures volatility.
A little history
Popular histories credit Munehisa Homma, an eighteenth-century rice merchant in Japan, with the ideas behind candlestick analysis; the charts as they are drawn today developed in Japan later. Steve Nison introduced them to Western traders with Japanese Candlestick Charting Techniques (Nison 1991), and they quickly became the default view in trading software (Morris 2006).
Questions
What do the colours mean?
One colour means the period closed above where it opened (a rise), the other that it closed below (a fall). Change both in “Series colours”.
Is this investment advice?
No. Chart Buffet draws your data; it doesn’t predict anything.
References
- Nison, S. (1991). Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
- Morris, G. L. (2006). Candlestick Charting Explained. New York: McGraw-Hill (3rd ed.).