Candlesticks and Forex Trading

As an investor in the forex market, you must know the importance and impact of a methodology involving technical analysis.

Candlesticks and forex should therefore sound as inseparable phrase because it is perhaps the oldest and proven method for successfully predicting the future price trends from available price and volume data.

This method of analysis evolved from the techniques used by the Japanese Rice traders in 18th century in Japan where Munehisa Homma of Dojima Rice Exchange, used past prices to predict future price movements and generated an enormous amount of wealth. The same concept of Candlesticks was adopted to analyze the Forex market that turned out to be overwhelming.

The Candlestick in forex trading considers the thought processes of the majority of the investors in the markets and generates signals reflecting an investors’ emotion. This shows the unique appeal of Candlestick and forex studies based on them. A chart pattern in Candlestick presents forex data in a dramatically dynamic visual way where you can identify a change in trend to magnify your profits.

The Candlesticks in forex have basic patterns comprising Long days, Short days, White Marubozu, Black Marubozu, Spinning tops, Stars, Rain drops. The reversal pattern in candlestick for forex has Dark Cloud Cover, Engulfing, Evening Star, Harami, Morning Star Doji, Piercing Line, Three Black Crows, Three White Soldiers. Other than these the candlestick patterns in forex can be continuation in Falling Three Methods or Rising Three Methods.

You can present the open, high, low, and close in candlestick for forex. The candlestick will be a hollow (white) when the close is higher than the open,. If the close is lower than the open, the candlestick will be filled (black).

Thin lines above and below the candlestick body in forex data, represents the period's entire trading range, which is known as the shadow. The top of the upper shadow in candlestick for forex, represents the high and the bottom of the lower shadow represents the low.

Candlestick and forex are the best example of a winning combination. From the candlestick pattern the forex trader will be able to see whether the trading extended well beyond the opening and/or closing price or was it confined closely to the open and/or closing price.

If you know how to read the Candlestick in forex you can visualize the trends it reflects. Long white candlestick and forex will show strong buying pressure – which means that the prices advanced significantly from open to close and with aggressive buyers. A long white candlesticks in forex chart after an extended period of declines, can mark a turning point or support level.

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