Japanese Candlesticks Patterns Explained
Japanese Candle Patterns PDFBrief History
Candlesticks were developed in 18th century by a famous rice trader known as Homma Munehisa to give an overview in general of the opening, high, low and closing market price over a specified time period.
They were utilized by the legend rice trader for predicting future market prices. After dominating the rice market, Munehisa after that eventually moved and went to the Tokyo Exchange where he gained huge trading fortunes using this trading analysis method. He is said to have made over one hundred consecutive winning trades.
Types of XAUUSD charts
There are 3 types of charts used in XAU USD: Line, bar and candles.
Line - plots a continuous line connecting/joining closing prices of a xauusd.
Bars- displayed as sequence of OHCL bars. O H C L represents OPEN HIGH LOW & CLOSE. The Opening price is highlighted as a horizontal dash hyphen to the left & closing market price as a horizontal dash hyphen to the right.
Main disadvantage of a bar chart is that it is not visually appealing and identifiable, hence most traders don't use them.
Candles - these use the same market price info as bar charts (open, high, low, and close). However, they are represented in a more visually identifiable and appealing way that resembles and looks like a candlestick that has wicks on both its ends.
How to Interpret
The rectangle section is known as the body.
The high & low are referered to as shadows & drawn as poking and protruding lines.
The colour is either blue or red
- (Blue or Green Colour) - XAUUSD Prices headed up
- (Red Color) - XAUUSD Prices headed down
Most trading platforms like the MT4, use colours to mark direction. Colours used are blue or green: when the price moves upwards, red: when price moves downward.
Candlesticks Vs. Bar Chart
When candles are used it's very easy to see if the price headed up or down as compared to when a bar Charts are used.
The Japanese techniques also have very many set-ups which are used by traders to trade the markets. These patterns have different analysis explanation and the most frequent are:
The above patterns is what makes the Japanese candlesticks popular among technical traders & it is why this type of analysis are most often utilized in analyzing the market. The analysis for these pattern setups in xauusd gold trading is the same as that one used in stocks trading.
Drawing These Charts on MT4 Platform Software
To draw these on the MT4, select the charts drawing tools within the "MT4 Tool-Bar" - shown below.
To view this tool bar on MT4 go to 'View' Next to file on the top left corner of MetaTrader 4 Software, Click 'View', Then Click 'Tool Bars', Then check the 'Charts' Button. The above tool bar will appear.
Once the above tool-bar, appears you as a gold trader can then select and choose the type you as a trader want to convert to, If you as a gold trader want to view using the bar format, click the bar tool button key just as is illustrated above, for line format click the line tool button, for Japanese candles format click the "candlesticks tool button key".
Learn More Tutorials & Lessons:
- ATR Indicator Settings on MetaTrader 4 Platform Software
- How to Add Moving Average(MA) on Chart
- How Do You Use Gann Swing Oscillator in FX?
- What's Margin Requirement for 1 Lot of HSI50 Indices?
- NZDCHF Pip Calculator
- Why FX Traders Select STP Brokers
