In the 18th century a wealthy Japanese businessman, Munehisa Homma developed a technical analysis method to analyze the price of rice contracts. Today this technique is called candlestick charting and is widely used when drawing stock charts. Homma, from Sakata, Japan began trading at the local rice exchange around 1750. He kept records of the market psychology learning to boost his profits by carefully monitoring prices and not to rushing into trades.
Homma is regarded as the Grandfather of candlesticks because of his research on price pattern recognition. Homma is credited with giving rise to a research technique which became the basis for trading in Japan.
Candlestick charts use the same price data as bar charts (open, high, low, close). However, candlestick charts are drawn in a much more visually identifiable way typically resembling a candle with wicks on both ends. The high and low are described as shadows and plotted as a single line.
Learning how to read candlestick charts is easy. The price range between the open and close is plotted as a rectangle on the single line. If the close is above the open, the body of the rectangle is white. If the close of the day is below the open, the body of the rectangle is red.