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Chakra is essential to even the most basic technique; it is the moulding of the physical energy present in every cell of the body and the spiritual energy gained from exercise and experience. Once moulded, it can be channelled through the chakra circulatory system, which is to chakra as the regular circulatory system is to blood, to any of the 361 chakra points (called tenketsu) in the body. Through various methods, the most common of which is hand seals, the chakra can then be manipulated to create an effect that would not be possible otherwise, such as walking on water, exhaling fire or creating illusions.
By moulding different ratios of the two energies, new types of chakra can be formed. Most ninja have a natural affinity to one type of chakra, but they have the capacity to create elemental chakra apart from their own affinity. There are five basic types, each stronger and weaker to another, but their relations, weaknesses, and strengths to each other are all explored. There is also the dealing of Yin and Yang and the balance of mental and physical energies. In addition to these five elements, certain kekkei genkai can mix elemental chakra to form new natures, for example it is possible to mix water and wind into ice. While many ninja can use more than one type of chakra, very few are able to use them simultaneously.
Normal chakra is a form of energy all living individuals naturally produce to some degree. Contained in the "chakra coils" that mainly surround and connect to each chakra-producing organ, the energy circulates throughout the body in a network called the "chakra circulatory system" (similar to the cardiovascular system). Certain groups, such as ninja, have learned to generate more chakra and release it outside their bodies through their "chakra points" (tenketsu) in order to perform special techniques (jutsu). Chakra is not normally visible to the human eye, though chakra can be seen in situations where a person releases as much of their chakra as possible. This is rarely seen due to the restrictions of certain chakra points (Eight Gates), limiting the amount of chakra an individual can release at a single given time. Chakra can also be visible when doing specific techniques (such as the Rasengan) which take a high degree of chakra control to perform.
Of the many different types of techniques, ninjutsu, genjutsu, dōjutsu, and so on, all require the use of chakra. However, taijutsu is different, usually requiring no chakra use whatsoever; stamina is all that is needed. While the ninja still needs a set amount of chakra to live (i.e. life force energy), regular taijutsu doesn't require any active moulding or manipulation of chakra (with few exceptions). A standard attack like a punch or kick falls into this technique category.
Chakra is the resulting form of energy when two other forms of energy are mixed together. The two energies are referred to as "physical energy" and "spiritual energy". Physical energy is collected from the body's cells and can be increased through training, stimulants, and exercise. Spiritual energy is derived from the mind's consciousness (i.e. the soul) and can be increased through studying, meditation, and experience. Having these two energies become more powerful will in-turn make the created chakra more powerful. Therefore, practising a technique repeatedly will build-up experience, building up one's spiritual energy, and thus allowing more chakra to be created. As a result, the ninja is able to do that same technique with more power. This same cycle applies for physical energy, except this time, instead of doing things like meditation, the ninja could, say, do push-ups.
The general term for the source of chakra, the overall physical and spiritual energy an individual has, is called "total stamina". The maximum amount of chakra an individual can create and retain at a given time is called their "chakra level".
Based on which ninjutsu the ninja uses, the amount of chakra will be different, as would the element the ninja employs. The five main elemental types are also the names for the Five Great Shinobi Nations: Fire, Wind, Lightning, Earth and Water. Each ninja has the potential to better utilise one of these styles and potentially more. Rinnegan users somehow have the ability to more easily control all five elements.
Advanced elements such as Wood Release and Ice Release are created by combining different elemental chakra types. Doing this is only possible with a kekkei genkai or having a tailed beast with such an element in canon.