Japanese Candlestick Chart

Technical analysis of the currency market includes many methods, and a Japanese candlestick chart is one of them. In this article, we will consider this type of analysis.

In general, the candlestick charting technique originated in Japan in the XIII century. Its founder was the Japanese rice dealer Munehisa Homma from Osaka. He traded on the rice exchange and sought to understand the psychology of sellers and buyers. Thanks to the herald alert system, he promptly received information about the slightest price changes, and, accordingly, responded as quickly as possible. This contributed to the fact that he was able to achieve unprecedented results and make a profit on a hundred transactions in a row. Munehisa was awarded the title of samurai for his outstanding services and received the right to be an adviser to the emperor. You can see his portrait in this picture.

Candlestick analysis has become available to modern traders through the books by Steve Nison and the writings by Gregory Morris, who studied and translated this method. 'Candles' are the main parameters for analysis - isolated candles or their combinations (candlestick patterns). Candlestick model reflects the psychology of market participants. It is important to pay attention to color and length of the candle, the absence / presence of shadows, as well as to the ratio between these elements. Candlestick patterns often give positive signals for opening and closing deals. To interpret candlestick patterns, it is recommended to look at the last candlestick on the right side of the chart and note if it is correlated to the previous one. If this is not enough, then you need to consider a combination of three subsequent candles. The best results were achieved while using day candlestick charts. Candlestick chart is ineffective if you consider shorter time intervals for analysis.

This analysis is simple and understandable for any trader, and its advantage is that it can be used in conjunction with other analytical tools. Although a novice trader may have some difficulties when recognizing candlestick patterns, after some time this will no longer be a problem. In order to determine entry points, it is recommended to combine candlestick analysis with other methods for analyzing financial markets.

As a summary, Japanese Candlesticks Charting is not just an another type of financial chart used to describe price, but it can also serve as one of the methods to predict future Forex price fluctuations.