Candlestick chart – The Secret of Success!
Candlestick chart is one of the most popular methods of technical analysis in forex market. It is widely used by forex investors across the globe. Candlestick chart pattern is basically a Japanese investment as it was first used by traders of Japan in 19th Century. That is why these candlestick charts are also known as Japanese candlestick charts. These charts play a vital role in technical analysis for a particular asset and help the traders to judge right market trends and make right investments.
What information is depicted by the candlestick chart!
If we dissect the anatomy of one candle in a candlestick chart then we can come to know about much information regarding the price of the asset. The top of the vertical line above the candle is the representation of highest price paid by the investors for the currency in a given time frame while the bottom of the vertical line below the candle represents the lowest price paid for the same currency in the same time frame. Now let us talk about the middle body or the candle. This candle shows the range of price movement of the currency between the opening and closing price of the currency. In short we will also come to know about the opening and closing price of the currency in a given time frame from the candle.
Candlestick chart has an effective graphical representation for providing overall information to the analyser. If the candle in between is filled by colour then it shows that the closing price of the currency is lower than the price at which it opened. This feature can also be used to judge the bullish and bearish trends in the market. A bullish candle is a candle with a long body but white in colour while a bearish candle will also have a long candle body but is black in colour. These days for better graphical representation chart makers also use colours like red for lower closing and blue or green for higher closing of the price of the currency.
Some other common candlestick patterns which can be seen on the candlestick charts are long lower shadow, long upper shadow, hammer, shooting star, Harami, doji, dragonfly doji, gravestone doji, high waved candles, engulfing candles and candles with spinning tops.
Why candlestick chart pattern are so popular?
- Candlestick chart pattern is popular amongst traders across the globe because it does graphical representation of the price movement of the asset. You not only get detailed price action of the asset but it is much more accurate than other chart formats.
- Candlestick patterns clearly show who is winning the battle between the bear and the bull thus gives a clear idea about supply and demand situation of the currency.
- Pictorial display of the force or lack of force behind any currency pair can take the technical analysis of the currency pair in the given time frame to a new dimension. It is quite beneficial for the traders.