Candlestick Charts

Japan gave birth to candlestick charts more than five hundred years ago. The technical analysis was first used by the Japanese in late 1600s at Dojima Rice Exchange while trading rice. The first trader who has reached the fortune by forecasting prices using the past price data was Munehisa Homma, a famous trader of this exchange. Homma has created a number of principles that are used in Japan nowadays. The set of data containing open price, high price, low price, and close price is traced in the chart as a candlestick.

The candlestick turns hollow (white or in some cases green) if the close price exceeds the open price. A filled (black or red) candlestick is seen when the open price exceeds the close one. The body (either filled or hollowed) of the candlestick is formed out of the difference between the open price and close price whether the shadows, which are thin lines at the top and at the bottom of the candlestick, give the information about the trading range during the candlestick's period. The upper shadow ends at the level showing the high price of the period and the lower shadow ends at the level of low price.

Technicians use candlesticks. Such popularity of candlesticks can be explained by their pleasant and comfortable outlook unlike any other techniques using bar or line charts. Candlestick chart can give some additional info about the prices concerning the correlation between the high and low and the open and close. Candlestick charts uncover the data of the possible market strength as well as of its overall structure. You should remember only 12 general patterns concerning Candlesticks. There are about 40 patterns of reversal and continuation that can be trading signals for you while using Japanese Candlesticks. Any of these patterns may possibly predict future price movement. This dozen signals are the ones you are likely to remember.

Most investors consider only these signals of Japanese Candlesticks usage enough for planning profitable trading decisions. They are the ones that watched by most of the traders most of the time. But reading this you shouldn't think that other patterns don't worth your attention. You can effectively make profits in case you follow these other signals. But they occur really seldom in actual trading. Their showings are thought to be not as reliable as of the major ones despite they can show very strong possibility of reversal. The pattern when open and close prices are equal of very close is called Doji. In this situation shadows length is not taken into consideration. Japanese explain this situation as the conflict of bears and bulls. Doji indicates the general hesitation of investors. The Gravestone Doji appears when both close and open become the low of the day. This is the sign of possible tops despite it's located in the market bottoms. This signal looks like a gravestone, that's why it is called Gravesone Doji.

When the candlestick has one or two very long shadows, the situation is called the Long-legged Doji. It signalizes that the market has reached its tops. The Rickshaw Man occurs when the open and close are located in the session's trading range middle. It is thought that this situation shows the trend losing its direction. The end of the downtrend forms the Bullish Engulfing Pattern. The white candlestick has its open price below and the close price above the ones of the previous day black candle body. This total exceeding of the previous day's values says that that the enormous pressure of the buyers overcomes the one of the sellers. The Bearish Engulfing Pattern is an opposite process to the bullish one. It occurs when an uptrend comes to an end. The black body of an actual candlestick gets longer than the white body of the previous day one. This process is the sign of the bears winning. When a bearish pattern lasts for two days and reaches the end of an upturn as well as the highest level of an overloaded are of trading, then the Dark Cloud Cover occurs. In this case the first day gives a reliable white candlestick and the second day opening price exceeds any of the values of the previous day.

The bottom reversal may be accompanied by the Piercing Pattern. It consists of two candlestick patterns that are located at the declining market end. The candlestick of the first day is black whether the one of the second day corresponds a long white candlestick. This day has an extreme low opening price that is even lower that any price traded the day before. The patter closes at a price which is higher than the middle of the "black day" candle.

If candlesticks have long shadows at their bottom along with the small size of real bodies, it is called Hammer and Hanging-man. These bodes form high price of the session. A Hammer occurs when the pattern described here takes place when the market trends down. This shows the trends looking for the base. Japanese call this process "trying to gauge the depth" or takuri.

In case the market is trending down, the Shooting Star Formation is a signal of bullish market approaching. This is also called an inverted hammer. Still, you should be patient until the bullish market gets verified. Now after we have learnt about some major signals, it is time to see how useful some other formations may be.


Forex Hoster - MetaTrader And Expert Advisor Forex Vps Hosting. Secure Forex Vps MetaTrader & Expert Advisor Hosting For Forex Mt4 Traders. We Support Windows, Mac Osx And Linux. Click Here!

Forex Candlesticks Made Easy! Click Here!

Forex Massacre. Brand New Site From Forex Trading Manuals! Click Here!

Money Beyond Belief By Dr. Joe Vitale And Brad Yates. Joe Vitale - Brad Yates - Teleseminar Recordings Helping Participants Achieve Money Freedom - Freedom From Limiting Financial Beliefs Using Eft Click Here!

Everything You Know Is Wrong! About Being Debt Free That Is!! And It Will Keep You In Debt The Rest Of Your Life! Click Here!

Credit Repair Secrets Revealed! Click Here!

Currency Exchange Cash. Proven Way To Generate Profits. Click Here!

5 EMAs Forex Trading System. No Lies, No Bs! Real Money, Live Account Statements Prove Over 96% Click Here!