Most of you have to know how the candlesticks work, because if you already have a software to trade, this candlesticks are key to understand the market, most of people use them to trade every day, it doesn´t matter if you have MT4 or Mt3, the thing is you can see this everywhere, even, most of the pictures you can find about software for fx, the candlesticks are in there.
Let me tell you a little bit about this, I can trade without them, they tell me everything about the market.
Japanese candlesticks originate from the Japanese rice trading markets in the 1700’s. They were used to track rice futures on the world’s first futures exchange. When the price is increasing, the candle turns blue as it heads higher. When the price is decreasing, the candle turns red as it moves lower. Candlesticks have a 2 wicks and a body in the middle. One end of the body represents the opening price, and the other end represents the closing price. The wicks on either end indicate the high and the low.
The kind of chart displays each time period in a "candlestick" format. As in the bar chart, the candlestick shows the open, high, low and close of a specific time period. A candlestick can either be solid or transparent. Its appearance depends on the relationship between the opening and the closing price. If the close is higher than the open, the candlestick is transparent or empty.
If the close is above the open, then a hollow candlestick (us
ually displayed as white) is drawn. If the close is below the open, then a filled candlestick (usually displayed as black) is drawn. The hollow or filled section of the candlestick is called the “real body” or body. The thin lines poking above and below the body display the high/low range and are called shadows. The top of the upper shadow is the “high”. The bottom of the lower shadow is the “low”.
Long bodies indicate strong buying or selling. The longer the body is, the more intense the buying or selling pressure.
Short bodies imply very little buying or selling activity. In street forex lingo, bulls mean buyers and bears mean sellers.
The upper and lower shadows on candlesticks provide important clues about the trading session.
Upper shadows signify the session high. Lower shadows signify the session low.
Candlesticks with long shadows show that trading action occurred well past the open and close.
Candlesticks with short shadows indicate that most of the trading action was confined near the open and close.
Candlestick charts have three major advantages when compared to bar charts.
1. Candlestick charts are much more "visually immediate" than bar charts. Once you get accustomed to the candle chart, it is much easier to see what has happened for a specific period - be it a day, a week an hour or one minute.
2. With a bar chart you need to mentally fill in the price action. You need to say to yourself, "The left tick says that's where it opened, the right tick where it closed. Now I see. It was an up day." With a candlestick chart, this is all done for you. You can spend your energy on analysis - not on figuring out what happened with the price.
3. With candles you can spot trends more quickly by looking for whether the candles are clear or colored. Within a trend, you can easily tell what a stock did in a specific period.
Most importantly, candles are vital for spotting reversals. These reversals are usually short term - precisely the kind the swing trader is looking for. When traditional technical analysis talks about reversals, usually it is referring to formations that occur over long periods of time. Typical reversal patterns are the "double top" and the "head and shoulders." By definition, these involve smart money distributing their shares to naive traders and normally occur over weeks or even months.
Let me tell you a little bit about this, I can trade without them, they tell me everything about the market.
Japanese candlesticks originate from the Japanese rice trading markets in the 1700’s. They were used to track rice futures on the world’s first futures exchange. When the price is increasing, the candle turns blue as it heads higher. When the price is decreasing, the candle turns red as it moves lower. Candlesticks have a 2 wicks and a body in the middle. One end of the body represents the opening price, and the other end represents the closing price. The wicks on either end indicate the high and the low.
The kind of chart displays each time period in a "candlestick" format. As in the bar chart, the candlestick shows the open, high, low and close of a specific time period. A candlestick can either be solid or transparent. Its appearance depends on the relationship between the opening and the closing price. If the close is higher than the open, the candlestick is transparent or empty.
If the close is above the open, then a hollow candlestick (us
ually displayed as white) is drawn. If the close is below the open, then a filled candlestick (usually displayed as black) is drawn. The hollow or filled section of the candlestick is called the “real body” or body. The thin lines poking above and below the body display the high/low range and are called shadows. The top of the upper shadow is the “high”. The bottom of the lower shadow is the “low”.Long bodies indicate strong buying or selling. The longer the body is, the more intense the buying or selling pressure.
Short bodies imply very little buying or selling activity. In street forex lingo, bulls mean buyers and bears mean sellers.
The upper and lower shadows on candlesticks provide important clues about the trading session.
Upper shadows signify the session high. Lower shadows signify the session low.
Candlesticks with long shadows show that trading action occurred well past the open and close.
Candlesticks with short shadows indicate that most of the trading action was confined near the open and close.
Candlestick charts have three major advantages when compared to bar charts.
1. Candlestick charts are much more "visually immediate" than bar charts. Once you get accustomed to the candle chart, it is much easier to see what has happened for a specific period - be it a day, a week an hour or one minute.
2. With a bar chart you need to mentally fill in the price action. You need to say to yourself, "The left tick says that's where it opened, the right tick where it closed. Now I see. It was an up day." With a candlestick chart, this is all done for you. You can spend your energy on analysis - not on figuring out what happened with the price.
3. With candles you can spot trends more quickly by looking for whether the candles are clear or colored. Within a trend, you can easily tell what a stock did in a specific period.
Most importantly, candles are vital for spotting reversals. These reversals are usually short term - precisely the kind the swing trader is looking for. When traditional technical analysis talks about reversals, usually it is referring to formations that occur over long periods of time. Typical reversal patterns are the "double top" and the "head and shoulders." By definition, these involve smart money distributing their shares to naive traders and normally occur over weeks or even months.
6 comments:
Original post to keep learning about forex.
good explanation for candlesticks, but stil you miss a big part f them, I think you have to make a Japanese Candlesticks part 2
I like your post, but I may to say that you miss a lot of information about the candlesticks, I don’t know if you know about reversal patterns? I think you need a part 2 of this.
I know guys, you are totally right! There going to be a part 2 in few days, im just waiting to more people to see this and when you get it, we can start with the second part. But you can tell me what you think about my blog. Thanks
It’s good to know more about something all of us use everyday. But I got an idea for you, what about if you write for the chart, for example bar and line, I don’t know if they have more information besides.
Nice, nice one! I like your way to write.
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