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The shapes of candlestick analysis in Forex
As the name implies, the method of market analysis using Japanese candlesticks appeared in Japan in the XVI century. It was one of the first methods of predicting the behavior of prices on the basis of technical analysis. Through many centuries this type of analysis has not lost its relevance and is one of the most respected and popular among traders in the global currency and stock markets.
The essence of the analysis price chart with candlesticks are similar in principle of construction based on the bars. Chart constructed of bars, worse perceived by the traders, so it can be considered less convenient.
The figure below shows a bullish (white) and bearish (black) candle, but in the trading platform, the trader can customize the color scheme as it is convenient. When a dealer builds a graph based on Japanese candlesticks, he sees four prices:
• open – open price;
• close – close price;
• high - local high;
• low – local minimum.
Bullish and bearish candlestick
Here we are almost reached the figures of candlestick analysis, it remains to recall quite a bit about the structure of the "Japanese", so you can move on to patterns.
The body of the candlestick is the rectangular area that is formed between the opening price and the closing price of the candle in the selected timeframe.
Shadow of a candle shows how much the price of opening (closing) different from the local maximum or minimum.
If the closing price is more than the value of the open price, so we face bullish candle, which is characterized by a white body (the picture above). If the closing price is below the opening value, in this case, a bearish candle (black body).
We can not predict the market condition or price movement direction on the basis of only one candlestick, it is necessary to analyze the whole combination and the shapes on the chart.
Basic shapes of candlestick analysis market
When candlestick analysis, the trader determines the trend with the shapes of candlestick analysis and can confirm the reversal or continuation of price movement.
Popular shapes candle market analysis
The bullish engulfing pattern (a complete review of the pattern of Absorption) using this shape of candlestick analysis, the trader analyzes the price movement in the absence of a flat ("the lateral market"). In this model (illustration above), the color of the first candle must match the existing trend, and the second color should be opposite to the first, the value of the closing price should be higher than the opening price of the first candle and the larger this difference, the stronger the signal for a turn.
In such a situation it is necessary to consider the timeframe. If the trader uses intraday strategy, it is desirable to use time H1 timeframe. If the chart is a 30 – minute or 15 – minute TF, one spark to change the direction of the trend is not enough. The bearish engulfing pattern with accuracy, but in reverse.
There are more popular figures candlestick analysis that will help to determine a change of trend, for example, "the Hammer."
The hammer candle Forex
If you look at the picture, the name of this model resembles that of the eponymous instrument or a medieval weapon hammer. If the candle body bottom, such figure candlestick analysis is called "Inverted hammer".
This figure indicates the approaching change in the current trend. Basically, the model "Hammer" warns the trader about the trend reversal in the downtrend (bear) Russ ascending. This happens on the next candle with a subsequent upward movement of prices.
Such a figure is formed when the market is a clear downward movement which gradually slows down. The bears want to continue the downward trend and make an attempt, but it does not help it rebound, which is formed by the handle of a hammer (the shadow of a candle).
The simple shape of the candle market analysis
I recommend the reviews of these two patterns:
• Pin-bar
• Doji
Unlike the previous shapes of candlestick analysis "Three stars in the South" indicates the slowdown of the bearish trend. In this case, the weakening may be temporary, or it may be a trend reversal.
This model is composed of three candles, where the body of the first more, the second less and less in the third. The opening price of each candle is more than close price of the previous one. This suggests that the bulls are showing interest to buy is still in a bearish movement.
In this case, the fourth candle can be a catalyst. If it is bullish and with a great body, then this may mean that the market trend reversal, and there was a takeover. If the fourth candle is bearish with long body, it will give a new impetus to the downward movement.
In many cases, when they formed the figure "Three stars in the South", the market started flat (the result of years of observations). In this case the trader should refrain from entering the market before the advent of the fourth, decisive candle.
Pattern three white soldiers
Model "Three white soldiers" is formed by the downward movement of the price and clearly signals the change in trend. The result is a figure of the candlestick analysis is similar to a ladder in which the opening price of next candle is located approximately in the middle of the body of the previous one.
When candlestick analysis market not the last role plays the choice of the correct timeframe and higher than TF, the more accurate signal of trend reversal or continuation.
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| Category: Forex | Added by: (30.10.2017)
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| Views: 333
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