How to Use Japanese Candles in CFD
Japanese Candlestick PatternsBrief History
Candlesticks were developed in the 18th century by legendary rice trader known as Homma Munehisa to give an overview of the opening, high, low and closing market cfd price over a given period of time.
They were used by the legendary rice trader to predict future market cfd prices. After dominating in the rice market, Munehisa then eventually moved to the Tokyo exchanges where he then gained a huge fortune using this trading analysis. It is said that He made over hundred consecutive winning trades.
Types of CFD Trading charts
There are 3 types of charts used in CFD: Line, bar & candlesticks.
Line - plots a continuous line connecting closing cfd prices of a cfd.
Bars- displayed as sequence of OHCL bars. O H C L represents OPEN HIGH LOW & CLOSE. The Opening cfd price is displayed as a horizontal dash on the left & closing cfd price as a horizontal dash on the right.
The main disadvantage of a bars is that it is not visually appealing, therefore most traders don't use them.
Candlesticks - these use the same price data as bar charts (open, high, low, and close). However, they in a much more visually identifiable way which resembles a candle-stick with wicks on both its ends.
How to Analyze
The rectangle section is known as body.
The high and low are described as shadows & drawn as poking lines.
The color is either blue or red
- (Blue or Green Color) - CFD Prices moved up
- (Red Color) - CFD Prices moved down
Most trading platforms like the MetaTrader 4, use colors to mark the direction. Colors used are blue or green: when price moves upward, red: when price moves downward.
Candles Vs. Bar Chart
When candles are used it's very easy to see if the cfd price moved up or down as opposed to when bars are used.
The Japanese techniques also have very many formations that are used to trade the CFD market. These patterns have different technical analysis interpretation & the most common are:
The above patterns is what makes the Japanese candlesticks popular among technical traders & it is why this type of analysis are the most widely used when it comes to analyzing the cfds trading market. The analysis for these pattern formations in cfds trading is same as that one used in stocks trading.
Drawing These Charts on MetaTrader 4
To draw these on the MetaTrader 4, choose the charts plotting tools within the "MT4 Tool-bar" - shown below.
To view this tool-bar in MT4 go to 'View' Next to file at top left corner of the MetaTrader 4 Platform, Click 'View', Then Click 'Toolbars', Then check the 'Charts' Button Key. The above tool bar will appear.
Once the above tool-bar, pops up you can then choose the type you want to convert to, If you want to view using the bar format, click the bar tool button key as shown above, for line format click the line tool button key, for Japanese candles format click the "candlesticks tool button key".
