And who would have thought that even in the Forex Market, they will find a way to show the world how amazing they are!Say hello to the Japanese Candlesticks! Often disregarded, it is, in my opinion, the oldest, simplest, and most effective trading technique there is. The Japanese Candlesticks can be a great indicator as to how the markets will move.
Japanese Candlesticks’ History
Candlesticks are thought to have been made around the 1700s by a Japanese trader named, Munehisa Homma.
Three Types of Forex Charts
Before we begin, I want you to familiarize yourself on the three types of charts traders use in the market.
It consists of a single line, and it is plotted by looking at a closing price on a particular time period. It ignores the price extremes as a result.It can be useful if you’re looking for key turning points on the higher time periods.As we know, markets move as a result of human behavior. The Japanese Candlestick charts show us a good representation of which between the two has more control over the Forex Market in a particular time period.Typically, a candlestick is blue and red in color.
The Five Types of Candles
The candle to the right fully engulfs the candle to the left. It indicates that the market is moving upwards. Look for these at key turning points of support and resistance. It is very likely that the market is shifting towards the upside. It shows that the Sellers are more in control.
If you see these at a key level of resistance, it’s very likely that the prices are going down.
The price goes down considerably, but it loses momentum, so the Buyers regained control which often leads to a higher close. If you see these when the market is down, it may easily become its turning point.
This shows that the Sellers are in control. As you can see, the price went up considerably but the Sellers rejected it which moved the price further down. We call it a bearish rejection candle. This can be a very good indicator of a market that is trending down.
This shows that the Sellers are in control. As you can see, the price went up considerably but the Sellers rejected it which moved the price further down.