The market price of each movement in a certain period of time can be represented in the form of candles, possessing the opening, closing, high and low prices. Appearing one after another, Japanese candlesticks show traders information about the market movement. But as it is well known, analysis of Japanese candlesticks is subjective and even the brightest candle patterns are not always triggered with absolute precision. Therefore, analysis of individual candles and their combinations has some features.
1. The place where candle pattern occur
The first in the such feature of this type of analysis is the o place where candle pattern occur on chart. Prior to opening a position, you should carefully study the market situation that preceded appearance of combination of candles. For example, the pattern "dark cloud" that emerged near the strong resistance level, should be interpreted more as a reversal pattern rather than "bearish" absorption showed outside the scope of resistance. The same way, formation of "doji" after a prolonged trend is a much more significant model than if a candle occurs on a flat market.
2. Ideal signal candlestick configurations
At the present stage of development of the foreign exchange market, many candlestick patterns significantly differ from that interpretation that was given in the classical books on the Japanese candlestick analysis. Prices of opening and closing, the highs and lows of candles, which are matched in candlestick combination may by a few points differ from the description, and thus mislead the majority of traders. Therefore, if you are going to trade based on candlestick patterns, you do not have to follow buy or sell signals, exclusively based on the standard interpretation. If a candlestick pattern is formed on the chart, it does not mean that it automatically gives a signal to open the position to buy or sell. Perhaps, for the final signal, you need to turn on additional indicators that will confirm the signal.
Thus, trading through analysis of market movements on the basis of Japanese candlestick patterns analysis - is an exciting creative process, which also partly depends on the individual trader’s psychology. However, to obtain a stable profitable result through the candlestick charts, you need take into account the nuances that was presented above.