Tip #2002-6: Creating Japanese Candlestick Charts In Excel
If you use historical pricing data in your analytical models one of the best ways to display this
information is with a Japanese candlestick chart. To create a candlestick chart you need the open, high,
low and close for an instrument. You can display the same information with a standard bar chart but
candlestick charts are more visually appealing and help you recognize trend changes.
With a bar chart you need to really look closely at the price
action to see if the close was higher or lower than the open.
Candlestick charts are color coded. A black candle indicates the
close was lower than the opening. A white candle indicates the close
was higher than the opening. With Excel you can apply a custom
colors to the candlesticks. For example, you can have a blue color indicate the closing
price to be higher than the opening price and a red color to indicate the closing price to be lower
than the opening price.
In addition to the color coding there are thin vertical lines above and below the body of the candle which
are called upper and lower shadows. The shadows represent high and low price extremes. The bodies of the
candlestick along with the shadow lines create formations which indicate various types of patterns. An entire
trading system has been developed around candlestick price charts.
Several books have been written on Japanese candlestick charting. An in depth explanation of how
to interpret candlestick patterns and formations can be found in:
Japanese Candlestick Charting Techniques: A Contemporary Guide to the Ancient Investment Techniques of the
Far East by Steve Nison.
There are also many web sites which offer explanations and summaries of candlestick charts and formations.
One of the best for a quick summary is:
AltaVest World Wide Trading
Our focus in this Willow Tip is how to create Japanese candlestick charts in Excel. Since candlestick
charts are one of Excel's standard chart types the process of creating an attractive candlestick chart
is quite easy. However, in order to create visually appealing charts you will need to go through some
extra steps. The links below will guide you through the process.
Use Excel's Chart Wizard
Some Design Tips and Tricks
Willow Solutions Inc. is a Microsoft Certified Partner with proven expertise and knowledge in developing
proprietary applications used primarily in the financial services industry. The company specializes in solutions
that combine the power of Microsoft Excel and Visual Basic, with an in-depth knowledge of financial markets.
Contact us if you would like to employ our services to help you enhance this model or help you design financial
models or customized applications.
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