Japanese candlesticks are a type of chart that shows investor mood and market dynamics. Japanese candlesticks are notably used as patterns that predict the direction of the market.
Japanese candle: what does it look like?
A candlestick looks like a bar (body) with or without thin lines (called shadows). The body is a range between two major points – the open and close prices. Shadows are placed above (upper shadow) and below (lower shadow) of the body and correspond to the highest and lowest price points.
The candlesticks have two colors. In general, traders use either black and white or green and red. So, if the candle is white or green, it is bullish and signifies that the price has increased during the chosen period. If it is black or red, it is bearish and reflects the direction of the price downward during the chosen time period. Nevertheless, the trading platforms allow you to choose the colors you want.
To learn how to read candlestick charts, let’s look at the example. You see a bullish candlestick because it is green in color. We have chosen the EUR / USD pair and a one-hour time frame, so you will know how the price of an asset has increased in one hour.
Japanese candlestick strategy
There are many strategies to try for trading, as there is a wide range of candlestick patterns. We will tell you about one of them. Before you start, we remind you of the main steps to follow.
As we mentioned above, candlestick patterns are linked to a trend. So, the first point is to find a strong trend. The second step is to find a candlestick pattern. If you see that the price is approaching a support or resistance level, it may be worth looking for a reversal pattern. If you are trading in a strong trend, find a continuation pattern.
Do Japanese candlesticks work?
Of course. Japanese candles are one of the most trusted tools for traders. They provide strong signals and are easily determined on the chart.
How to read Japanese candlesticks?
Japanese candlesticks have four main points. They are open, closed, at minimum and maximum prices. These points reflect the sentiment of traders and market fluctuations. Short-wick candlesticks indicate a stable market. Those with long shadows are linked to high volatility.
Japanese candlesticks are the most popular type of chart because they show four crucial points that provide complete information to traders. Moreover, they form some of the most reliable models that predict the direction of the market with a high level of accuracy.
Even beginners have no difficulty finding these models. It is therefore crucial to practice before implementation. For this, you can use a libertex demo account. The broker’s demo account copies the real market but allows trading with fictitious money to gain more experience and avoid losses in the future.
For more information, visit https://finmaxbo.com/en/strategy/3810-hammer-candlestick-how-it-works.html .