Candlestick Charts For Forex Traders
Among the many types of technical analysis available to currency traders, the most popular and the single most useful are undoubtedly candlestick charts. During the 18th. century, they were originally developed in Japan by a prominent trader of commodities who used them to chart the fluctuating price of rice. To this day they are often called Japanese candlestick charts, for this reason. In fact, many of the patterns that they form have Japanese names.
The bar chart showing the opening, high, low and closing prices of a commodity was more reliable than the simple line graphs plotting the price of a commodity at regular intervals in time that had been used for centuries. The bar chart was useful and helped traders to predict future price movements, but candlestick charts were even better.
Charles Dow, founder of the Wall Street Journal and co-founder of the Dow Jones company, introduced them to the American Stock Market at the beginning of the 20th. century. From there they were adapted by the worldwide financial markets.
Candlestick Formation
The chart is made up of a series of 'candlesticks' which typically include different points measuring the differential in prices over a certain period of time, which might be 5 minutes, 15 minutes, or longer. The 'candlesticks' have a chunky body with vertical lines stretching up from the top (the upper shadow or wick) and bottom (the lower shadow or wick).
The top of the wick is the highest point reached during the time period and the lowest point of the lower wick is the low. The top and bottom of the body are the opening and closing prices. If price rose during the period the body will be white (or green or blue if colored). The bottom of the body marks the opening price and its top marks the close. If the price fell during the period the prices are the other way around and to show this at a glance the body will be black (or red if colored).
Using Candlesticks in Charts In Currency Trading
A chart showing 5 or 15 minute candles over a period of several hours can provide the forex trader with many patterns on which he can base a system for determining when a trend is developing. For example, when the candle body is black or red and lower than the preceding candles, it indicates that buyers are very bearish. When the candle body is white or green and higher than the preceding candles, it indicates that buyers are very bullish.
Candlestick charts are one of the most useful visual aids for any fx trader. Being able to see implications at a glance is vital in the fast moving currency markets where trading decisions often need to be made in a split second. - 23208
The bar chart showing the opening, high, low and closing prices of a commodity was more reliable than the simple line graphs plotting the price of a commodity at regular intervals in time that had been used for centuries. The bar chart was useful and helped traders to predict future price movements, but candlestick charts were even better.
Charles Dow, founder of the Wall Street Journal and co-founder of the Dow Jones company, introduced them to the American Stock Market at the beginning of the 20th. century. From there they were adapted by the worldwide financial markets.
Candlestick Formation
The chart is made up of a series of 'candlesticks' which typically include different points measuring the differential in prices over a certain period of time, which might be 5 minutes, 15 minutes, or longer. The 'candlesticks' have a chunky body with vertical lines stretching up from the top (the upper shadow or wick) and bottom (the lower shadow or wick).
The top of the wick is the highest point reached during the time period and the lowest point of the lower wick is the low. The top and bottom of the body are the opening and closing prices. If price rose during the period the body will be white (or green or blue if colored). The bottom of the body marks the opening price and its top marks the close. If the price fell during the period the prices are the other way around and to show this at a glance the body will be black (or red if colored).
Using Candlesticks in Charts In Currency Trading
A chart showing 5 or 15 minute candles over a period of several hours can provide the forex trader with many patterns on which he can base a system for determining when a trend is developing. For example, when the candle body is black or red and lower than the preceding candles, it indicates that buyers are very bearish. When the candle body is white or green and higher than the preceding candles, it indicates that buyers are very bullish.
Candlestick charts are one of the most useful visual aids for any fx trader. Being able to see implications at a glance is vital in the fast moving currency markets where trading decisions often need to be made in a split second. - 23208
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posted by X - Men @ 2:50 AM
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