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The Japanese Candlesticks Analysis is a method developed by Japanese traders to express the movement of prices in the futures markets for Rice, which is the reason behind the name. It is actually the preferred method for most traders and it is much clearer than other methods, and it became the main method to express prices movements all over world and in all financial markets. The Japanese Candlesticks Analysis is a famous strategy in Managed Forex Accounts and Forex Trading Signals.
What are Japanese candles?
The rectangle represents the body of the candle and the tails represents the wicks of the candle. Each candle represents a unit of time in the selected time period. Japanese candles comes in two forms; either up Bullish candle, or down Bearish candle.
A Bullish candle; Is a blank or white candle, and represents the rise in the price. The characteristics of the Bullish Candle are:
The bottom of the body represents the price that the currency was at when the period started.
The top of the body represents the price that the currency was at when the period ended.
The top tail is the highest price the currency reached during the same time period.
The bottom tail is the lowest price the currency reached during the same time period.
A Bearish candle: is a colored or black candle, and represents the decline in the price. The characteristics of the Bearish Candle are
The bottom of the body represents the price that the currency was at when the period ended.
The top of the body represents the price that the currency was at when the period started.
The top tail is the highest price the currency reached during the same time period.
The bottom tail is the lowest price the currency reached during the same time period.
Since it is a falling candle, the price at the end of the period (closing price) will be less than the price at the beginning of the period (opening price). Please note that candles may be colored in different colors according to Trading Platform, but you should be able to distinguish between the rising candle and falling one and that is the important thing.
The candlestick method is an accurate and clear way to express the price movement. With some practice and soon you will be able to take a quick look at the chart and get all information you need about the movement in the exchange rate within the time frame that you choose.
Candlestick Analysis
This method proved effective as a clear and accurate projection of the price movement when used in the correct way, making it superior compared to other methods when used to express the movement of prices. Not only we benefit from its accuracy and clarity, but candlesticks also show the psychological condition of the market and the nature of the conflict between sellers; who push prices lower and buyers who push prices higher, or in other words, the nature of the conflict between Bears and Bulls or between the forces of Supply and Demand. Candles are formed by events in the market, and therefore, according to the current form of the candle, one can predict the direction of the subsequent candle. Hence, Japanese candlestick analysis is similar to Patterns Analysis, a method used to analyze shapes such as the Head and Shoulders, but it depends on the shape of candlestick itself rather than the form of the chart or graph.
This method’s credibility rises when using a relatively long time frame, such as four hours or daily time frame. When the trader analyze a currency on a weekly time frame, for example, and a Japanese candle was formed in a certain shape, then the trader can expect the direction of currency relatively accurately, and therefore, analysts gave each shape or form of Japanese candles a name of its own which, each has its own characteristics.
There are two forms of Japanese candles:
• Continuation
• Reversal.
There are many forms which have different meanings depending on the shape candles that came before them, and we will explain a number of the famous ones in consecutive episodes, including: the Hammer, the Hanging man, the Haramy, the Star, the Three soldiers, the Doji and many others that are similarly funny. It should be taken into consideration that candlestick analysis, like other methods of analysis should be used in conjunction with other types of analysis and not independently. It is not enough to see a certain shape of a candle stick and determine if the price will increase or decrease.
