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Forex charts: Candle Forex

There are many different ways to plot Forex charts. However, there is a certain type of Forex charts preferred by traders around the world - charts of Japanese Forex candlesticks. What are these charts?

In the Forex market, Japanese candlesticks are widely used by beginners and professional traders alike.

To master the art of trading with Japanese candlesticks, the best way is to learn to recognize these Japanese candlesticks and try out your strategy on a demo account to move on to the next step.

First let's look at what the Japanese candlesticks are, the types and ways to use them.

 

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What is the Candlestick Forex chart

Japanese Candles, Candlestick - a type of chart that appeared in the XVIII century in Japan, and is now widely used in technical analysis of the Forex market.

Input data for construction: the opening price, maximum, minimum and closing period.

The chart of Japanese candlesticks is drawn in a rectangular system of two coordinates. Time is set aside on the horizontal axis, and the price is set aside on the vertical axis.

Each element (the smallest component) of the chart - a candlestick (candlestick) - shows the range of exchange rate changes for a single period (minute, hour, day, week, etc.) in the form of four central price values for this period. Lower and upper horizontal lines - opening and closing prices, top of a candle - maximum price, the bottom of a candle - minimum price.

The range between the opening values and closing is depicted as a rectangle - this is the body of the candlestick. If the closing and opening values are the same, the body of the candlestick turns into a horizontal stroke and the candlestick itself into a cross. If the closing is higher than the opening price (market growth), the candlestick body is usually glowing. If the closing price lower than the opening one ("drop" market), the candlestick body usually glows darkly. On the original Japanese charts, a rising market is indicated by a red candle, while a black candle indicates a falling market. When converting coloured charts into black and white, a red candle turned into white, and black remained black. Modern technical analysis programs allow you to specify any colour to the candlesticks. The general rule: a candle of background colour - growing, and filled - falling, or growing candle lighter falling.

The vertical sections above and below the candlestick body are its shadow (wick).

After all four prices of the period are fixed on the chart, there is a shift to the right by a unit interval to apply the values of the next period price in a new candle.

The sequence of Japanese candlesticks forms a candlestick chart.

The candlestick chart shows gaps and allows to assess the market trend for each trading period visually.

Key points of the analysis of Japanese candlesticks

  • The body. The longer the body, the stronger the market potential to go in this direction: for a white candle - up, for a black candle - down.

  • Shadows. The longer is the shadow from any side, and the weaker is the market potential to go in this direction. For example, a long upper shadow indicates the inability of buyers to gain a foothold at the top.

  • Denial. If the market has not gone in the expected direction, it is more likely to move in the opposite direction. Here it is necessary to wait for the confirming candle.

Various lines (trend, support and resistance) and charts of technical indicators are imposed on the chart of Japanese candlesticks.

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Types of Japanese Candlesticks

  • Black (bear) candles

  • White (bull) candles

  • Dodge (opening and closing prices are equal)

All other candles are a modification of these by lengthening or shortening the bodies and shadows. Individual candles or their combinations may indicate a change or continuation of the trend.