How to Read Japanese Candlestick Charts?

The Japanese candlestick chart. Get to know the main chart patterns. You probably think that financial analysis is complicated but it actually comes down to 2 simple things: reading charts and reading news. There are many types of charts but Japanese candlestick or simply candlestick are the most popular ones. Such a chart consists of red and green "candlesticks", or "candles" lined one after another. Each candle gives you detailed information about the price movement within a specified time interval. In fact, Japanese candlesticks are the best way to visualize the ups and downs of a price so that you can spot potential opportunities to BUY or SELL. Let's take a more detailed look. Every candle consists of a body and one or two "tails" called shadows sticking out of it. The body indicates the range between the open and close prices for a specific time frame, and the shadows represent the highest and lowest price levels reached for the set interval. Japanese candlestick charts are easy to read. A red candle shows that the price is going down, and a green one represents an increasing price. If you are looking at a 10-minute chart, each candle represents a 10-minute time interval. We see a green candle when the open price is lower than the close price. If the price closes lower than it opened, then the candle is red. As simple as that! What kind of signals does a candlestick chart provide? It is no surprise that candlestick charts are so popular. They are excellent for spotting market turning points. By looking at the patterns that candles create, you can often guess if a certain market is about to continue in its current direction, or reverse it. Patterns that show that the market could change direction are called reversal patterns. They could be bearish: ones that indicate the change from an uptrend to a downtrend and should be perceived as a signal to SELL or bullish - these show that a price that has been decreasing is likely to start going up and we should BUY. Let's see the most popular candlestick patterns which encourage you to BUY. Bullish engulfing The bullish engulfing consists of a red candle, followed by a bigger green one, which fully engulfs the red candle. The pattern is an indication for a market turning point. In simple words, it is likely that the market may start going up and you can BUY. The indication is even stronger if the green candlestick engulfs two or three red candles. Hammer The name of this candle is pretty much self-explanatory. You will recognize the hammer by its short body, lower shadow that is about two or three times the length of the body, and a shorter upper shadow or no shadow at all. The hammer is usually a clear indication of a declining price reversing its direction and starting to go up so you can start BUYing! But just to be safe, you could always wait for additional confirmation. Such confirmation is a green candle closing above the open of the hammer for example. Morning doji star This pattern appears when there is a slight market movement and consists of three candles: a red one, followed by a doji, followed by a green candle closing beyond the middle of the first candle. If the green candle is longer than  the red one, the signal is even more reliable. Spotting the morning doji star is a signal to BUY. Some chart patterns that mean you can SELL. Bearish engulfing This pattern is the opposite of Bullish engulfing. A green candle is completely engulfed by a following red candle. When you spot it, you can SELL as the sellers on the market have possibly managed to overpower the buyers and the price direction could reverse. Dark cloud cover The dark cloud cover appears before the price drops down. A long green candle is followed by a red one that opens at a new high and closes below the middle of the green candle. Keep in mind that when trading currencies a second candle opening at new high is rare so the red candle usually opens at the close level of the green one. Once you see this pattern you can go ahead and SELL or you can wait for another, smaller red candle to form and confirm the dark cloud cover. Shooting star The shooting star is a red candlestick with a small body, long upper shadow and a short lower one. When it appears at the end of an uptrend, it shows you that you can SELL since the price, which has been rising up to that point, may start falling instead. See? Reading Japanese candlestick charts is not rocket science. Just make sure to observe your charts carefully, and you will soon learn to spot patterns as they form. For more free trading tutorials check out www.trading212.com.

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Keywords: forex, FX, trading, Trading 212 stock market, gold, oil, cfd, futures, demo account, forex video, forex education, forex platform, trading212, forex web platform, forex tutorial, forex tutorials, currency, candlestick chart, Japanese candlestick. patterns, technical analysis, market turning points, trading signals, bullish engulfing, hammer, morning doji star, bearish engulfing, dark cloud cover, shooting star, japanese, learn, trade

Id: OGFxp3Pixg8

Length: 5min 39sec (339 seconds)

Published: Thu Nov 28 2013