Candlestick Charts For Currency Traders
Among the many types of technical analysis available to forex traders, the single most useful and popular are probably candlestick charts. These were originally developed in Japan during the 18th century by a prominent commodity trader who used them to chart the fluctuations in the price of rice. For this reason they are often known as Japanese candlestick charts, and many of the patterns that they form have Japanese names.
Simple line graphs plotting the price of a commodity at regular intervals in time had been used for centuries, but traders were in need of something that could plot more variables within a two dimensional graph. The bar chart showing the opening, high, low and closing prices of a commodity was useful and helped traders to predict future price movements in a more reliable way than line charts, but candlestick charts were even better.
Charles Dow introduced them to the American stock market at the beginning of the 20th. century and from there to the worldwide financial markets. Co-founder of the Dow Jones company, Dow was the founder of the Wall Street Journal.
Candlestick Formation
The chart is made up of a series of 'candlesticks' which typically 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 different points measure the differential in prices over a certain period of time, which might be 5 minutes, 15 minutes or longer.
The top and bottom of the body are the opening and closing prices. 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 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). If price rose during the period the body will be white (or green or blue if colored).
Using Candlesticks in Charts In Currency Trading
A forex trader can base a system for determining when a trend is developing on the many patterns that develop on the charts showing 5 or 15 minute candles over a period of several hours. For example, when the candle body is green or white and higher than the preceding candles, it indicates that buyers are very bullish. When it is red or black and lower than the preceding candles, it indicates that buyers are very bearish.
In the fast moving forex markets where trading decisions often need to be made in a split second, being able to see these implications at a glance is vital. So for any forex trader, candlestick charts are one of the most useful visual aids. - 23200
Simple line graphs plotting the price of a commodity at regular intervals in time had been used for centuries, but traders were in need of something that could plot more variables within a two dimensional graph. The bar chart showing the opening, high, low and closing prices of a commodity was useful and helped traders to predict future price movements in a more reliable way than line charts, but candlestick charts were even better.
Charles Dow introduced them to the American stock market at the beginning of the 20th. century and from there to the worldwide financial markets. Co-founder of the Dow Jones company, Dow was the founder of the Wall Street Journal.
Candlestick Formation
The chart is made up of a series of 'candlesticks' which typically 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 different points measure the differential in prices over a certain period of time, which might be 5 minutes, 15 minutes or longer.
The top and bottom of the body are the opening and closing prices. 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 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). If price rose during the period the body will be white (or green or blue if colored).
Using Candlesticks in Charts In Currency Trading
A forex trader can base a system for determining when a trend is developing on the many patterns that develop on the charts showing 5 or 15 minute candles over a period of several hours. For example, when the candle body is green or white and higher than the preceding candles, it indicates that buyers are very bullish. When it is red or black and lower than the preceding candles, it indicates that buyers are very bearish.
In the fast moving forex markets where trading decisions often need to be made in a split second, being able to see these implications at a glance is vital. So for any forex trader, candlestick charts are one of the most useful visual aids. - 23200
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posted by X - Men @ 2:48 AM
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