What is Candlestick Chart?
Candlestick is a type of bar graph. It consists of a bar-chart and line-chart. It is commonly used for equity and currency price patterns analysis. Candlestick charts was developed by a Japanese trader Homma Munehisa in 18th century. Homma Munehisa was a rice trader; he used this to chart rice trading. Candlestick chart is similar to a standard bar chart. It shows the ups, downs, open and close over specific intervals of time. It used a solid or empty object to show the status of time frame that may be up or down. It has many patterns and each pattern has a very strange name. Some of its patterns are named as “three dark rows”, “dark cloud cove” and “Gravestone doji”. Candle stick chart is based on the concept that emotions play very important part to set the trends in market.
Candlestick Chart in Forex Trading
Candlestick chart has become very popular among forex traders. Candlestick chart is very handy for a forex trader who is keen to see the short term tendencies of market. Forex traders are using candlestick chart as an analytical tool from very beginning of the forex trade. Candlestick chart shows the trade of each day with full detail of highs, lows, opening and closing of trade. For a new trader candlestick chart may seem confusing and complex.
Candlestick Patterns
There are many types of candlestick chart patterns. The common candlestick pattern includes: White candlestick, black candlestick, long lower and long upper shadows, hammer, dragonfly, spinning top and Marbozu. All these patterns represent the different market behaviors, e.g. white candlestick pattern shows the upward movement while black candlestick pattern shows downward trend. Spinning top shows a very strict range of trading between the opening and closing. Doji pattern represents the time intervals in which the opening and closing prices for a specific session are equal or nearly equal with very littler difference.
Candlestick chart has become very popular among forex traders. Most of the Forex trading systems prefer the candlestick chart pattern to see the nature of trends in the market. Candlestick charts are great source of visual aid to facilitate the decision making process. Candlestick charts represent the different trends in certain colors. Every candlestick bar with lighter color shows that final or closing price is greater than the initial or opening price. Dark colored bars represent that closing price is lesser than the opening price.
The candlestick chart patterns are the must skill to learn for a seasoned and successful forex traders. Candlestick charts evolves from the emotions of the market. It can be used as a very handy tool to use for calculating the emotional factors affecting the market. For a forex trader, it is very important to calculate the emotional factors accurately to make transparent and less error prone trading decisions.