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An Introduction
To Japanese Candlesticks
At first
sight, Japanese candlesticks and forex trading seem to be a
completely contradictory juxtaposition of terms and it would
be almost impossible to believe that they would actually have
something to do with each other… or do they?
Unbelievable
as it may sound; Japanese candlesticks are in fact very closely
related to forex trading.
Originally
developed as a technique for trading rice several centuries
ago in Japan, candle charts were eventually employed by traders
as an effective strategy for keeping track of price movements.
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The ease
with which they can be read make candle charts a more popular
method for tracking price movements as compared to standard
bar charts. In fact, the odds are very high that almost all
forex charts that you are likely to come across will be Japanese
candlesticks.
The high
and low prices as well as the opening prices and closing prices
are taken into consideration when developing candle charts.
A hollow
candle, which is usually drawn in green or white, would indicate
that the closing price was higher than the opening price.
A filled
candle, usually colored red or black, indicated that the closing
price was lower than the opening price.
A majority
of online brokers seem to prefer using the more contemporary
red & green colored candles to indicate trends instead of
the more conventional black & white color scheme.
Candle charts
filled with red and green candles make it so much easier even
for newcomers to spot the emerging trends; plenty of red
candles would signify price decreases whereas green would signify
price increases. It couldn’t get easier!
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