Japanese Candlesticks are unique tools that can help traders to determine the market prices of the assets. These Candle Charts give visual cues about the market prices which can prove helpful for the traders to take a suitable action to stay profitable in their trades.
Japanese Candlesticks provide in-depth market information in comparison to traditional bar charts. These Candle Charts emphasize on the highs and lows with a greater depth. By emphasizing the relationship between the open and close price of the assets, these charts help traders in better decision-making.
Japanese Candle Charts help traders to understand the market sentiments in a better manner. Using these candlesticks, a trader can quickly identify different types of price actions that tend to occur in the market and thus can speculate with more confidence. A trader can utilize the Japanese Candle Charts along with other technical analysis tools in selecting entry and exit points of a trade.
Explaining Japanese Candlesticks
The Japanese Candle Charts can be divided into several segments and its different parts and features may signify different information. For example, the body of a candlestick signifies the difference between the open price and close price. Its different colors illustrate different meanings. For example, red shows prices going down whereas blue signifies that the market is going up. The wicks show the extreme prices, whether high or low, of a currency on a particular day.
The body of the candlestick is thicker than its shadow, and hence it visually stresses upon the relationship between the close and open price. A candlestick is more powerful to visually present the market forces that can influence the prices. Thus, a trader using candlestick charts will have a better idea of the price movement. There could be several specific patterns of a candlestick that can help a trader in evaluating the future price movements. These patterns can have specific names as well such as Dark Cloud Cover, Morning Star etc and which tend to reflect specific market sentiments.
Use of Candlesticks
Candlesticks can help a trader to develop valuable market insight, which is important for trading in the market profitably. However, a candlestick alone may not give sufficient information about the market sentiments and a trader may need to use a set of technical analysis tool in combination to assess the market movements.
There could be several important market events that could be beyond the candle formations, and hence one should not rely on them as a sole technical analysis tool.