What are the Candlesticks telling you?Today I want to talk a little about Japanese candlesticks. Thecandlesticks provide unique visual cues that make reading price action alot easier, not only do they help you understand the market sentiment,but they offer so much more then the traditional Forex bar chart.Take a look at this traditional line chart belowNow as you can see, from the example above, the chart is very dull andboring, you can see the open and close prices represented by thehorizontal lines but its not very clear and hard to read easily.Now take a look at this Japanese candlestick example
This looks a lot better, you can clearly see the open and close at a glance,also the best thing is, you can see straight away if the candle is bullish orbearish as each candle is represented by two coloursGreen = BullishRed = BearishThe colour of the body of the candlestick represents the differencebetween the open and closing price and whether the days (or weeks oryears) market closed up or down.The wicks (or shadows) show the extreme lows and highs of price for thecurrency that day.
However just looking at the candlesticks alone is not the only way togauge price action, the candlesticks alone does not give you enough todetermine the market sentiment. Traders tend to use candlesticks withother technical indicators like moving averages, I of course use theIchimoku indicator for my complete view of the market, the mixture ofJapanese Candlesticks with the Ichimoku indicator is one of the mostaccurate way to trade, if you havent checked out my Blog all aboutIchimoku, check it out herePopular Candlestick PatternsTo further strengthen your analysis of the chart we can however look forspecific patterns from the candlesticks to spot strengths or weakness infuture price movement.Many of these candlesticks patterns have eccentric names like, Darkcloud cover, Morning star or Engulfing Pattern, these are based ondirect translations of their original Japanese names.In future updates I will go into more detail about all the patterns youwill come across, for now though I want to show you some of theimportant ones so you can start watching the charts and looking out forthem.Bearish Reversal Patterns"Abandoned Baby"The Abandoned Baby is a bearish reversal pattern characterized by a
large move up followed by a doji or small candle, and then a third candleheading in the opposite direction.This is a very strong reversal pattern so keep an eye out for this one."Bearish Dark Cloud Cover"Bearish Dark Cloud Pattern is a two candlestick pattern. This is also avery strong reversal pattern and is very common.The pattern consists of two candlesticks, the first one is a strong bullishcandlestick. The second candlestick opens above the previouscandlestick but closes below forming a bearish candlestick."Bearish Evening Star"
Evening star is a strong reversal pattern and is a three candlestickpattern. The first candlestick is a strong bullish candlestick. The secondcandlestick is small bullish or bearish candlestick. The third candlestickis a strong bearish candlestick.Bullish Reversal PatternsThese are the same as the Bearish patterns, just the opposite way round.In future posts I will also cover some strong continuation patterns, theseare patterns that show a strong possibility that price action maycontinue to carry moving in the same direction.Look out for future posts where I will dig a little deeper into candlestickanalysis and show you some more patterns.Until next timeChris(admin)