Japanese Candle-sticks Setup Patterns Explained
Japanese CFDs Candle Patterns PDFBrief History
Candlesticks were developed in the 18th century by the legendary rice trader known as Homma Munehisa to give an overview of opening, high, low and closing market cfds price over a given period of time.
They were used by the legendary rice trader to predict future market prices. After dominating rice market, Munehisa then eventually moved to the Tokyo Exchanges where he then gained a huge trading fortune using this trading analysis. It's said that He made over 100 consecutive winning trades.
Types of CFD Trading charts
There are Three types of charts used in CFD: Line, bar & candles.
Line - plots a continuous line connecting closing prices of a cfd.
Bars- displayed as sequence of OHCL bars. O H C L represents OPEN HIGH LOW & CLOSE. The Opening cfds price is displayed as a horizontal dash on left and closing cfds price as a horizontal dash on the right.
The main disadvantage of a bars is that it is not visually appealing, therefore most traders don't use them.
Candlesticks - these use the same cfds price data as bar charts (open, high, low, & close). However, they are displayed in a much more visually identifiable way which resembles a candle with wicks on both its ends.
How to Analyze
Rectangle part is called the body.
The high & low are described as shadows and plotted as poking lines.
The color is either blue or red
- (Blue or Green Color) - Prices moved up
- (Red Color) - Prices moved down
Most platforms like the MT4, use colors to mark the direction. Colors used are blue or green: when cfds price moves up, red: when cfds price moves down.
Candlesticks Vs. Bar Trading Chart
When candlesticks are used it is very easy to see if the cfds price moved up or down as opposed to when bars are used.
The Japanese methods also have very many formations that are used to trade the market. These patterns have different analysis explanation and the most common are:
The above patterns is what makes the Japanese candlesticks popular among technical traders & it is why this type of analysis are the most widely used when it comes to analyzing the cfds market. The analysis for these setups in cfd trading is the same as that one used in stocks trading.
Drawing These Charts in MetaTrader 4 Software
To draw these on the MT4, choose the trading charts drawing tools within the "MT4 Tool-bar" - shown below.
To view this toolbar on MT4 navigate to "View" Next to file at the tops left corner of MT4 Platform, Click "View", Then Click "Tool bars", Then check "Charts" Button. Above toolbar will appear.
Once the above tool-bar, appears you can then choose the type you want to convert to, If you want to view using the bar format, click the bar tool button as shown above, for line format click the line tool button, for Japanese candles format click the "candlesticks tool button".
What is a Trading Plan? - Writing a Trading Plan Example
Alternatives: EA Automated Robots or Copier Trading Signals
