Do you find it hard to analyse your financial charts in a technical way? Would you like to use a more intuitive, simple method? Read on and find out about Candlestick Charts.
Candlestick charts are said to have been originated in Japan by a rice trader, Homma Munehisa. The charts gave Homma an overview of the rice market. It is said that he once made profit on 100 consecutive trades! Candlestick charts were noticed by Charles Dow in around 1900 and are used very widely today. The charts are now applied to currency markets to predict future movement and to document the open, close, high and low prices for a given period.
Candlesticks are normally made up from either a solid or hollow rectangular body and an upper and lower shadow (which would be wicks on a wax candle). The shadows show the highest and lowest price that the security (currency in this case) was traded for in a period of time. The body shows the opening and closing trades. If the security closed higher than it opened, the body is hollow, with the opening price at the bottom of the body and the closing price at the top. If the security closed lower than it opened, the body is solid, with the opening price at the top and the closing price at the bottom. A candlestick doesn’t have to have either a body or a wick. In most charts now, the body is coloured depending wheather the price closed higher or lower than when it opened. Red and green candlesticks are commonplace.
Prices are driven by trade and the emotions that govern the people making those trades. Candlestick charts are very good for tracking this in a minute by minute fashion but trading in the short term is known to be risky. Luckily, candlestick charts are equally valid for longer periods. Most modern software enables you to choose a period from seconds to months or even years. This is far safer since long term trends tend to be more stable in nature.
Depending on the pattern of candlesticks, they can show bullish or bearish behavior and therefore indicate where a market is headed. Different patterns mean different things of course and need to be interpreted very carefully. There are many patterns to learn but they are visual which can aid the your learning. A course in candlestick charts is essential be it either a book or videos. A good system is recommended below.
In this article I have just given a very basic introduction but there is a wealth on information available online. Candlestick charts have been used for centuries and for good reason. They are visual, the patterns are easy to learn and they are a reliable source of indicators. Get the advantage by learning all you can about them.
Steve Smith recommends the Forex Candlestick System and is the founder of New FX Pro
Article Source:http://www.articlesbase.com/currency-trading-articles/candlestick-charts-and-how-they-can-help-you-trade-forex-1461019.html
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One of the unique charting tools that Forex users use is the candlestick chart. The candlestick was used by Japanese rice traders and have only recently become popular with the Western world. Candlestick charts are popular because of their visual representation.
Candlestick charts are given their name because the chart has long rectangle boxes and vertical lines above and below the boxes. Upon looking at the chart, it looks like a candlestick with a wick above the candle and a wick below the candle. This chart tells you the high, low, open, and close of a currency. The period can be anything from 15 minutes to daily; whatever you set it at.
Can a candlestick tell you what to buy or sell? Not by itself, it won’t. However, add it to other indicators or signals and you have a strong idea of what the trend is doing and going to do. Imagine a fight going on between bulls and bears. The candlestick will tell you how the battle came out; who won. If the candle is green (depends on your software) and the price is higher than when it opened; the bulls are winning. If the candle is red and the price is lower; the bears are beating the bulls.
Even the shadow of the candle can tell you things you wouldn’t expect. If the shadows are long, both upper and lower, but the candle remained small, then the bears and bulls took the price as far as each could go but neither could hold the price and it returned to normal. If enough of these candles with long shadows is apparent, the market is not going to change unless some outside stimulus happens.
Candles come in many forms as well. Each of the different candles can tell you a very interesting story. Ignore the information at your peril. Learn to read and understand all the different types of candles and you will strongly reinforce your Forex trading strategy. Candlestick charts have been gaining in popularity over the last few years as more traders in the Forex market have begun to realize how they can enhance other signals and indicators to give them an edge.
Candlestick charts should not be ignored. Add them to your current repertoire of signals and you can change the odds to be more in favor for you.
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Article Source:http://www.articlesbase.com/currency-trading-articles/forex-strategy-automated-forex-trading-signals-1169135.html
