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Japanese Candlesticks Analysis

The Japanese Candlesticks Analysis is a method developed by Japanese traders to express the movement of prices in the futures markets for rice. It is actually the preferred method for most traders because it is much clearer than other ones, and it became the main expression of price movements in all financial markets. The Japanese Candlesticks Analysis is the main strategy used in Managed Forex Accounts, Forex Trading Signals, and it is among subjects discussed in the Training Course

What are the Japanese candlesticks?

Japanese Candlesticks take the formation below

Japanese Candlesticks Analysis | FXLORDS

The rectangle represents the body of the candle and the tails represents the shadows of the candle. Each candle represents a selected unit of time. Japanese candlesticks comes in two forms; either a bullish candle; heading upwards, or a bearish candle which heads downwards

A bullish candle is a blank or white candle, and represents an increase in the price. The characteristics of the bullish candle are:

  • The bottom of the body represents the price that the currency was at when the period started.
  • The top of the body represents the price that the currency was at when the period ended.
  • The top shadow is the highest price the currency reached during the same time period.
  • The bottom shadow is the lowest price the currency reached during the same time period.

Since it is a bullish candle, the price at the end of the period (closing price) will be more than the price at the beginning of the period (opening price)

A bearish candle: is a colored or black candle, and represents a decrease in the price. The characteristics of the bearish candle are

  • The bottom of the body represents the price that the currency was at when the period ended.
  • The top of the body represents the price that the currency was at when the period started.
  • The top shadow is the highest price the currency reached during the same time period.
  • The bottom shadow is the lowest price the currency reached during the same time period.

Since it is a falling candle, the price at the end of the period (closing price) will be less than the price at the beginning of the period (opening price). Please note that candlesticks may be colored in different colors according to trading platform, but usualy it is easy distinguish between the rising candle and falling one and that is the important thing.

The Japanese candlesticks analysis is an accurate and clear way to express the price movement. With little practice you will be able to take a quick look at the chart and get all information you need about the movement in the exchange rate within the time frame that you choose.

Japanese Candlesticks Analysis

This method proved effective as a clear and accurate projection of the price movement when used in the correct way, making it superior compared to other methods. Not only we benefit from its accuracy and clarity, but candlesticks also show the psychological condition of market participants and the nature of the supply and demand, or in other words, the conflict between bulls; who push prices higher and bears who push prices higher.

Candlesticks incorporates all events in the market, therefore, according to the current form of the candlestick, one can tell the overall condition of the market. This method’s credibility rises when using a relatively long time frame, such as four hours or daily time frame.

There are two kinds of Japanese candlesticks; continuation and reversal, but there are many forms which have different meanings and characteristics depending on the shape of the candlestick, among these shapes are the Hammer and the Hanging man, the Haramy, the Shooting Star, the Doji and many others which names are similarly funny. It should be taken into consideration that Japanese candlestick analysis, like other methods of analysis, it should be used in conjunction with other types of analysis and not independently. It is not enough to see a certain shape of a candle stick and determine if the price will increase or decrease, you need a confirmation by technical indicators or chart patterns to be able to make a proper decision.

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About Razi Hammoudeh

Razi’s professional experience was gained over the course of more than a decade working with leading Forex market makers in the Middle East, Asia and Europe where he learned about trading, financial instruments and global markets. Being exposed to the wide range of skills he acquired along the years, he continued to develop his trading strategies and further improving his track record in Forex trading. He used innovative business development strategies to find FXLORDS, helping it to rapidly become a major provider of education and trading tools to the successful trader. He is an enthusiastic individual, motivated by challenge and renowned for pushing the limits, always looking to gain some more experience and help as much as possible along the way.

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